Azure Dynamics reports fiscal 2006 year end results

    TORONTO, March 21 /CNW/ - Azure Dynamics Corporation (TSX: AZD &
LSE: ADC) ("Azure" or the "Company") a leading developer of hybrid electric
and electric powertrains for commercial vehicles, today announced its
financial results for the three and twelve-month periods ended December 31,
2006. The Company also provided an update on corporate and product development
activities in the year.

    2006 Highlights

    -   Revenue totalled $5.8 million for 2006 compared to $4.6 million in
    -   Completed equity financings raising net proceeds of $31.9 million
    -   Established joint development agreement with Ford Motor Company to
        develop a hybrid electric powertrain for Ford's E-series commercial
    -   Signed agreement with StarTrans for the production of hybrid shuttle
    -   Signed sales and distribution agreements with twelve StarTrans bus
    -   Signed MOU with Kidron for the branding, marketing and sale of LEEP
        (Low Emission Electric Power) system
    -   Launched the production of the G1 series hybrid shuttle bus and
        delivery van
    -   Built a total of 40 production G1 series hybrid electric powered

    "In 2006, we made strong progress in building strategic relationships
with key industry leaders, as noted above, to advance our product development
programs and enhance our penetration into our target markets. In line with
these advancements we have focused our development efforts on our core product
lines, including our series G1 and P1 delivery vans and shuttle buses," said
D. Campbell Deacon, CEO of Azure Dynamics. "By focusing on the
commercialization of these core products we are confident we will secure
additional fleets as customers in the current year. Strategically we continue
to carefully examine opportunities to utilize our technology developments to
maximize the growth of our Company".

    Financial Results

    Revenue for the fourth quarter of 2006 totalled $3.0 million compared to
$1.0 million in the fourth quarter of 2005. For the year ended December 31,
2006 revenue increased to $5.8 million compared to $4.6 million in 2005. Net
loss for the fourth quarter of 2006 totalled $5.0 million, or $(0.03) per
share compared to a loss of $6.7 million or $(0.04) per share in the fourth
quarter of 2005. For the year ended December 31, 2006, the Company's net loss
was $23.4 million, or $(0.14) per share, compared to a net loss of
$21.9 million, or $(0.15) per share in 2005.
    Before contributions, the Company's engineering, research and development
("R&D") expenses in the quarter totalled $5.1 million (including $2.7 million
in product development costs), compared to $3.4 million for the same period in
2005 (including $1.5 million in product development costs). For the year ended
December 31, 2006, the Company's engineering and R&D expenses totalled
$17.6 million (including $10.8 million in product development costs) compared
to $13.2 million during the same period in 2005 (including $6.4 million in
product development costs).
    As at December 31, 2006, the Company's cash and cash equivalents totalled
$27.2 million and working capital totalled $32.5 million, compared to cash and
cash equivalents of $20.7 million and working capital of $18.5 million as at
December 31, 2005. During the year, the Company completed equity financings,
raising net proceeds of $31.9 million to fund ongoing product development,
operations and working capital.


    In the execution of its business development strategy, the Company has
been actively seeking a strategic industry partner. The process has turned up
several options, but management and the board have not felt that any of the
options to date provide the Company or its shareholders significant value over
its current plan. Evaluation of these and other alternatives to maximize both
value and resources is ongoing. Azure's strategic committee is continuing to
engage in discussions with various parties as well as consider other ways to
achieve value creation.

    Product Developments

    Azure has formed significant relationships with industry leaders to
increase penetration into its target markets and advance its product
development programs. The agreements with Ford and StarTrans provide access to
product development support and established distribution networks throughout
North America. During the year, Azure launched commercial production of its
G1 series hybrid product, on the Workhorse Custom Chassis platform, and
expects to increasingly generate commercial revenues from applications of this
product. In order to fully capitalize on these recent developments, Azure is
now focusing its growth strategy on the four main programs outlined below.
Significant product developments in each of these four core product lines for
fiscal 2006 included:

        G1 Series (7,500 to 16,000 lbs. gross vehicle weight, "GVW")

           -  Launched the commercial production of the G1 series hybrid
              shuttle bus and delivery van on the Workhorse Custom Chassis

           -  Built a total of 40 production G1 series hybrid electric
              powered chassis. Thirty of these units were fitted with
              delivery van bodies and are being placed into delivery service
              in March and April, bringing the total fleet of Azure vehicles
              in operation by Purolator to 49 units. The remaining 10 hybrid
              chassis are being used to build hybrid shuttle buses.

           -  Signed supply agreement for the production of hybrid shuttle
              buses with StarTrans. The first StarTrans G1 shuttle bus (the
              CitiBus Hybrid Senator HD or "CitiBus") was completed in
              October 2006. The first nine customer units are scheduled for
              delivery in the first half of 2007 which is also when on-line
              production capacity is anticipated to be established at

           -  Signed on twelve bus distributors across North America for the
              marketing and sales of the CitiBus. Azure now has access to a
              distributor network covering approximately 70% of the targeted
              shuttle bus market in the US and Canada.

        P1 Parallel (10,000 - 19,000 lbs. GVW)

           -  Completed agreement with Ford Motor Company to enable Azure to
              develop a hybrid electric powertrain for Ford's E-series
              commercial platform. This agreement will provide Azure with an
              avenue to achieve rapid penetration of the volume market for
              commercial vehicles in North America. The P1 product is
              expected to have wider application than the G1 series product
              and is intended to address the broader, higher-volume markets.

           -  Completed a number of concept P1 parallel hybrid vehicles for
              commercial and military applications.

           -  The Company is currently evaluating and testing next-generation
              prototypes. Demonstration prototypes will be scheduled for
              customer in-service trials in mid-2007. Thereafter, a quantity
              of pre-production units for lead customers is anticipated to be
              built, commencing in late-2007 with full production commencing
              in 2008. It is intended, subject to formal agreement, to
              distribute the hybridized chassis through Ford's distribution

           -  Completed two funded military programs, the AM General High
              Mobility Multipurpose Wheeled Vehicle integrated with a third
              generation Auxiliary Power Distribution System ("APDS") and a
              ground-support aviation APDS developed for the US Air Force.
              Both of these programs will require minimal future support from

        P2 Parallel (over 19,000 lbs. GVW)

           -  Updated existing design and built second-generation prototypes.

           -  Two delivery trucks were delivered to the Charmer-Sunbelt Group
              in October 2006 and are being evaluated in-service.

        LEEP product (formerly referred to as Under-The-Hood)

           -  Signed a MOU with Kidron, a division of VT Specialized Vehicles
              Corporation, for the branding, marketing and sale of Azure's
              LEEP systems throughout the North American refrigerated truck
              body segment. Kidron has committed to provide a base vehicle to
              Azure by mid-March 2007. The LEEP system is expected to be in
              production by the second-half of 2007.

    The Company's complete fiscal 2006 audited year end financial statements
and MD&A are available at or on the Company's website at

    About Azure Dynamics

    Azure Dynamics Corporation (TSX: AZD) (LSE: ADC) is a world leader in the
development and production of hybrid electric and electric components and
powertrain systems for commercial vehicles. Azure is strategically targeting
the commercial delivery vehicle and shuttle bus markets and is currently
working internationally with various partners and customers. The Company is
committed to providing customers and partners with innovative, cost-efficient,
and environmentally-friendly energy management solutions. Azure Dynamics'
operations are based in North America and Europe.
    For more information please visit

    The TSX and LSE Exchanges do not accept responsibility for the adequacy
    or accuracy of this release.

    Forward-looking Statements

    This press release contains forward-looking statements. More
particularly, this press release contains statements concerning Azure's
business development strategy, projected commercial revenues and product
    The forward-looking statements are based on certain key expectations and
assumptions made by Azure, including expectations and assumptions concerning
achievement of current timetables for development programs, target market
acceptance of Azure's products, current and new product performance,
availability and cost of labor and expertise, and evolving markets for power
for transportation vehicles. Although Azure believes that the expectations and
assumptions on which the forward-looking statements are based are reasonable,
undue reliance should not be placed on the forward-looking statements because
Azure can give no assurance that they will prove to be correct. Since
forward-looking statements address future events and conditions, by their very
nature they involve inherent risks and uncertainties. Actual results could
differ materially from those currently anticipated due to a number of factors
and risks. These include, but are not limited to, the risks associated with
Azure's early stage of development, lack of product revenues and history of
losses, requirements for additional financing, uncertainty as to commercial
viability, uncertainty as to product development and commercialization
milestones being met, uncertainty as to the market for Azure's products and
unproven acceptance of Azure's technology, competition for capital, product
market and personnel, uncertainty as to target markets, dependence upon third
parties, changes in environmental laws or policies, uncertainty as to patent
and proprietary rights, availability of management and key personnel, and
acquisition integration risk. These risks are set out in more detail in
Azure's annual information form which can be accessed at
    The forward-looking statements contained in this press release are made
as of the date hereof and Azure undertakes no obligation to update publicly or
revise any forward-looking statements or information, whether as a result of
new information, future events or otherwise, unless so required by applicable
securities laws.

                                                  Azure Dynamics Corporation
                                             (A Development Stage Enterprise)
                                                 Consolidated Balance Sheets
                                                        (Stated in Thousands)

                                                         December   December
                                                          31 2006    31 2005
    As at                                                       $          $

       Cash and cash equivalents (Note 6)                  27,192     20,721
       Accounts receivable                                  3,394      1,004
       Contributions receivable (Note 14)                   1,274        597
       Inventory and related prepayments (Note 7)           3,821      2,696
       Prepaid expenses                                       831        980
                                                           36,512     25,998

    Restricted cash (Note 6)                                  699        698
    Property and equipment (Note 8)                         5,614      5,573
    Other assets                                                -         61
    Intangible assets, net of amortization (Note 9)        10,542     12,133
    Goodwill (Note 3)                                       2,932      2,932

                                                           56,299     47,395

      Accounts payable and accrued liabilities              2,814      3,403
      Customer deposits & deferred revenue                  1,046      1,574
      Current portion of notes payable (Note 4)               212      2,558
                                                            4,072      7,535

         Deferred revenue                                     943      1,038
         Notes payable (Note 4)                             2,294          -
                                                            3,237      1,038
    Shareholders' equity
      Share capital (Note 12)                             112,803     80,701
      Contributed surplus (Note 12)                         3,816      2,316
      Deficit                                             (67,629)   (44,195)
                                                           48,990     38,822

                                                           56,299     47,395

                                                  Azure Dynamics Corporation
                                             (A Development Stage Enterprise)
                           Consolidated Statements of Operations and Deficit
                                                        (Stated in Thousands)

                                                      For the
                                                    years ended   Cumulative
                                                    December 31      Since
                                                  2006       2005  Inception
                                                     $          $          $

    Revenues                                     5,771      4,608     10,379

    Cost of sales                                4,590      3,835      8,425
    Gross Margin                                 1,181        773      1,954

      Engineering, research, development
       and related costs, net                   13,466     11,443     34,033
      Selling and marketing                      3,171      3,360     10,262
      General and administrative                 8,376      8,178     26,515
    Total expenses                              25,013     22,981     70,810
    Loss from operations                       (23,832)   (22,208)   (68,856)

      Interest and other income, net               487        290      1,328
      Foreign currency gains/(losses)              (89)        22       (101)

    Net loss for the period                    (23,434)   (21,896)   (67,629)

    Deficit, beginning of period               (44,195)   (22,299)         -
    Deficit, end of period                     (67,629)   (44,195)   (67,629)

    Loss per share - basic                       (0.14)     (0.15)

    Weighted average number of shares
     - basic(*)                                164,130     142,224

    (*) No fully diluted earnings per share have been disclosed, as these
        would be anti dilutive.

                                                  Azure Dynamics Corporation
                                             (A Development Stage Enterprise)
                                       Consolidated Statements of Cash Flows
                                                        (Stated in Thousands)

                                                      For the
                                                    years ended   Cumulative
                                                    December 31      Since
                                                  2006       2005  Inception
                                                     $          $          $

    Cash flows from operating activities
      Net loss for the period                  (23,434)   (21,896)   (67,629)
      Adjustments for:
      Amortization of property and
       equipment and other assets                  780        661      2,275
      Amortization of intangible assets          1,749      1,591      3,340
      Unrealized foreign currency
       gains/(losses)                             (245)       170        (75)
      Accretion expense on convertible
       debentures                                    -          -         74
      Amortizaton of deferred financing
       costs                                         -          -         88
      Lease termination                              -          -        458
      Common shares issued in exchange
       for services                                  -          -         78
      Stock option compensation expense          1,696      1,618      3,943
                                               (19,454)   (17,856)   (57,448)

      Changes in non-cash working
       capital items (note 16)                  (5,232)      (362)    (6,761)
      Movement due to exchange impact              (24)       (76)      (100)

    Total Cash flows from operating
     activities                                (24,710)   (18,294)   (57,448)

    Cash flows from financing activities
      Issuance of common shares
       (net of costs)                           31,905     26,287     92,349
      Alternative Investment Market
       listing costs                                 -          -     (1,000)
      Capital Assurance Agreement costs              -          -       (965)
      Convertible debentures funds
       received (net of costs)                       -          -      2,009
      Issuance of special warrants                   -          -      3,500
      Repayment of obligations under
       capital lease                                 -          -        (27)
      Repayment of long term debt                    -          -        (50)
      Principle payments on notes payable          (54)       (42)       (96)
      Movement due to exchange impact                4       (374)      (370)
    Total Cash flows from financing
     activities                                 31,855     25,871     95,350
    Cash flows from investing activities
      Acquisition of property and equipment       (820)      (864)    (3,087)
      Acquisition of other assets                  (97)       (71)      (863)
      Changes in Restricted Cash                     -       (698)      (698)
      Cash acquired from acquisition of
       subsidiary, net of costs                      -        365        365
      Changes in loans to employees                  -          -         92
      Movement due to exchange impact              238          -        238
    Total Cash flows from investing
     activities                                   (679)    (1,268)    (3,953)
    Increase in cash and cash equivalents        6,466      6,309     33,948

    Exchange impact on cash held in
     foreign currency                                5         99        104

    Cash and cash equivalents, beginning
     of period                                  20,721     14,313          -
    Cash and cash equivalents, end of
     period                                     27,192     20,721     34,052

For further information:

For further information: Daniel Renzella, Senior Vice-President, Finance
and CFO, (781) 932-9009 ext 229, Email:; Steven
Glaser, Vice-President, Corporate Affairs, (416) 367-0220 ext 105, Email:

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