Hemisphere GPS Grows 46% on Record Third Quarter Revenues

www.HemisphereGPS.com

CALGARY, Nov. 8 /CNW/ - (TSX: HEM) Hemisphere GPS, a designer and manufacturer of advanced GPS products, today reported financial results for the third quarter ended September 30, 2010. All amounts in this news release are expressed in US dollars.

For the third quarter ended September 30, 2010, Hemisphere GPS reported a 46% increase in revenues to $13.2 million compared to $9.1 million in the third quarter of 2009. This is the highest Q3 revenue level ever reported by Hemisphere GPS, driven primarily by sales to the Agriculture segment. Total sales of ground-based agriculture products grew by 54% from the third quarter of 2009 while revenues for air-based agriculture products grew by 16%. Ground agriculture product sales to international distributors, OEMs and systems integrator customers were particularly strong during the quarter as a result of new products and improved market conditions for agriculture in general. Revenues from the Company's Precision Products segment grew by 39% versus the third quarter of 2009 with strength in sales of GPS receivers, Vector heading sensor products and GPS boards sold to OEM customers.

North American demand showed improvement with revenues up by 17% following a decline of 17% over the first half of 2010. International revenues continued to show strong growth, increasing 84% compared to the third quarter of 2009. Sales to customers in Europe increased by 62% and sales in Australia increased by 194% compared to third quarter of 2009. The introduction of the US Outback Guidance distribution model into the Australian market has contributed to growing Australian sales. Sales to other markets, including South America and Asia, were up by over 95% compared to the third quarter of 2009 continuing the strong growth seen in the second quarter.

"Throughout 2010 we communicated expectations for a stronger than usual closing six months to our year based on new product releases, increased order backlog strength, new strategic customer opportunities, improving monthly performance relative to 2009, continued strength in South America, Australia and Asia and more recently from improved optimism related to commodity prices," said Steven Koles, President and CEO of Hemisphere GPS. The third quarter growth reflects these factors, further supported by strong international demand for our new products. We are encouraged that North American demand has begun to show improvement. North America has recovered at a slower pace than our International markets, however, significant strengthening in grain commodity prices during the quarter may support improved confidence and demand from these customers."

The US agriculture sector has shown recent strength following significant increases in commodity pricing during the third quarter. In August, the US Department of Agriculture increased its projection for net farm income to $77.1 billion, up from its February projection of $63 billion, and up by 24% from 2009. This would make 2010 the fourth highest year ever in the United States.

Third quarter gross margins of $6.1 million, or 46.1%, were up from $3.9 million, or 43%, for the third quarter of 2009. Margins improved year over year primarily as a result of a lower impact from foreign exchange on the cost of sales compared to that experienced in the third quarter of 2009.

Operating expenses were $8 million in the third quarter, an increase of $0.4 million compared to the third quarter of 2009. Approximately half of the increase in operating expenses occurred as Canadian and Australian dollar expenses are converted and reported in US dollars at a lower rate.

Research and development expenses for the quarter of $2.7 million increased by $0.3 million or approximately 14% compared to 2009. In the third quarter, the Company announced a record number of new product introductions in a single quarter. The investment in research and development activities is critical for the Company to maintain and build its position in current and targeted markets.

Hemisphere GPS realized a loss of $2 million, or ($0.04) per share (basic and diluted) in the third quarter of 2010 compared to a loss of $3.8 million, or ($0.07) per share (basic and diluted) in the third quarter of 2009. The third quarter is typically the seasonally lowest revenue for Hemisphere GPS based on the buying cycle in the agricultural markets.

For the first nine months of 2010, Hemisphere GPS reported revenues of $43.8 million, a 6% increase from revenues of $41.5 million, for the same period in 2009. Gross margin for the first nine months of 2010 was 45%, down from 50% in the same period of 2009, impacted primarily by currency changes. Year-over-year expenses increased by $1.9 million, with most of the increase resulting from stronger Canadian and Australian dollars. The loss for the first nine months of 2010 was $5.6 million, or ($0.10) per share (basic and diluted), compared to a net loss of $3.4 million, or ($0.06) per share (basic and diluted), in the first nine months of 2009.

At September 30, 2010, Hemisphere GPS held cash of $7.8 million, as compared to $7.9 million at June 30, 2010, and $8.4 million at December 31, 2009. Working capital at the end of the third quarter was $24.5 million.

Third quarter Operational Highlights

• Hemisphere GPS and Stara S.A. Industria de Implementos Agricolas launched eDriveX in Brazil under the Stara brand, SPEED DRIVEx. Stara, one of the world's largest agricultural equipment manufacturers, is offering SPEED DRIVEx as a part of its precision automated steering solution. When combined with Outback S3 and BaseLineX or A220/A221 RTK GPS systems, the system automatically steers farm machinery to centimeter-level accuracy. The new system, SPEED DRIVEx, will be sold throughout Stara's distribution network that includes over 1,100 resellers. Hemisphere GPS's eDriveX systems will ship in volume to Stara during the fourth quarter of 2010.
  
  
• Following the successful release of the X200 full two-dimensional machine guidance system in March of this year, Hemisphere GPS released the Earthworks X300 excavator guidance system. Integrating Hemisphere GPS's patented Crescent Vector GPS compass technology, X300 measures and displays three-dimensional excavator positioning to operators, vastly improving excavation proficiency and accuracy and greatly reducing rework. X300 reduces the need for survey staking and manual grade checking, which leads to greater efficiency, lower cost and improved safety. The operator can remain in the cab, making the best use of the operating hours.
  
  
• Three new Earthworks dealers were added to the Company's distribution network, serving the mid-Atlantic and Western United States; Rocky Mountain Laser, Print-O-Stat, and Engineering Supply Company. Each channel partner will represent the Hemisphere GPS Earthworks product portfolio, including the X200 and X300 excavator machine guidance systems. Hemisphere GPS Earthworks products build on the Company's proven technology to further meet the needs of the construction industry by providing construction-specific solutions used to guide and control earth-moving machinery.
  
  
• Hemisphere GPS applied its S3 Outback guidance technology to the Oil and Gas Industry through a customized version of the S3 in partnership with Summit Liability Solutions. The resulting product, the S3-S Navigator provides a drilling waste disposal solution that manages the ever-increasing regulatory pressure to be environmentally compliant. The S3-S uses Hemisphere GPS's Crescent GPS receiver technology in combination with a Hemisphere GPS eDriveTC for tilt control to precisely apply drilling fluids to a disposal area and is designed to eliminate most of the human error currently present in drilling waste disposal services.
  
  
• Hemisphere GPS launched the R131 receiver; a rack-mountable addition to the R100 Series of DGPS receivers. The R131 allows for consistent sub-meter performance with standard differential and Hemisphere GPS' exclusive COAST™ technology which maintains accuracy during temporary loss of differential.  This addition to the already successful R100 Series of receivers has already resulted in a major order from India, with the R131 being the major component of the order.
  
  
• In the third quarter, Sunshine Village ski resort began outfitting its entire Snow Cat fleet with Hemisphere GPS's new snow grooming guidance systems. Sunshine Village operators can use the guidance systems to record boundaries and set flags on the screen to map tree lines, out-of-bounds limits, winch holds, hazards or other areas of interest. With Hemisphere's snow grooming guidance systems, maintenance managers are able to review job files for operator and machine performance and concerns. It is easy to plot speed, position, area covered and time. "We experienced productivity improvements immediately with Hemisphere's snow grooming guidance systems" says Rod Chisholm, maintenance manager at Sunshine Village ski resort.
  
  
• Hemisphere GPS introduced its next-generation Eclipse II GNSS receiver technology and released the Eclipse II OEM board -- the first product incorporating these technological advancements. Based on new Hemisphere GPS firmware and ASIC designs, Eclipse II provides improved RTK performance, GPS, GLONASS, SBAS and OmniSTAR support, and reduced power consumption. The powerful new digital ASIC can process five separate GNSS frequencies and up to 90 separate satellite signals at one time. Multiple copies of the digital and analog ASICs are being combined into Eclipse II GNSS receivers that offer the most optimal combination of performance and value in the marketplace. In addition, the miniEclipse was unveiled, providing a compact dual-frequency GPS OEM board that incorporates the same digital and analog ASIC design as the Eclipse II OEM board. The miniEclipse is the smallest precision dual-frequency (L1/L2) OEM module available in the market today, making integration even easier. MiniEclipse is a drop-in board replacement for Hemisphere GPS's very successful Crescent board. Crescent module integrators can easily transition to dual frequency by replacing it with miniEclipse, adding a few new messages and then connecting a dual-frequency antenna. Providing advanced dual-frequency GPS performance in a small-form factor board provides integrators with a powerful new option for designing compact GPS solutions.
  
  
• Using the latest GNSS patented technology, Hemisphere GPS announced the R320 -- the first GNSS receiver built on Hemisphere's new Eclipse II OEM board - offering extremely quick start-up and reacquisition times, tracking GPS L1/L2, GLONASS L1/L2, SBAS augmentation signals, and OmniSTAR HP/XP/VBS. Offering such upgradable features as RTK base station functionality or RTK rover performance as well as GLONASS tracking, R320 represents a cost-effective, multi-GNSS solution compatible with other GNSS products. As a result, R320 fits a wide range of precise positioning applications including land and hydrographic surveying, machine guidance, and control. R320 is the first of what will be a full line of Eclipse II-based products.
  
  
• Hemisphere GPS announced that Technomaster, a marine electronics engineering firm in Brazil, had integrated Hemisphere GPS's new LV101 GPS compass into a state-of-the-art marine navigation autopilot system. The LV101 GPS compass is paired with Technomaster's exclusive navigation technology to create an autopilot system suitable for large vessels and small pleasure crafts.
  
  
• Hemisphere GPS increased its antenna offerings, introducing the new A52 and A21 which adds more precision, reliability and value to Hemisphere GPS's leading Crescent and Eclipse GPS technology. The A52 is multi-GNSS (GPS L1/L2/L5, GLONASS L1/L2, Beidou, SBAS, OmniSTAR, and Galileo E1/E5a and b) and can be used in challenging environments (such as near buildings and foliage) as it has superior multipath mitigation, a stable phase centre and strong SNRs even at low elevations. The A21, already used for aerial application guidance and flow control, but now available for precise mapping and surveying, receives GPS L1, SBAS and OmniSTAR L-band signals.
  
  
• Hemisphere GPS Inc. released HQ -- a real-time Web-based asset tracking tool that allows companies to track the position and position-related data of aircraft and other assets, such as spotter vehicles and loader trucks. Combining an Iridium satellite modem or cellular modem with Hemisphere GPS's own M3 or IntelliStar aerial guidance system, HQ provides the ability to more effectively co-ordinate flight plans, resulting in reduced time and costs.  Initially targeted at firefighting, forestry and agricultural customers, HQ is ideally suited for companies that need to track multiple aircraft in flight at the same time. The Hemisphere GPS-managed web server stores all flight and asset information, allowing customers to view current flight data as well as all historical data from previously completed flights. The HQ Web interface allows real-time monitoring of aircraft to ensure aircraft are moving and in their proper locations.

Conference Call

An earnings conference call and Web cast has been scheduled for Monday, November 8, 2010 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 [phone] or 1-888-231-8191 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 November 15. Please dial 1- 416-849-0833 or 1-800-642-1687 and enter password 19111644 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, construction, and other markets. The Company holds numerous patents and other intellectual property and owns several leading brand names, including Outback Guidance®, a leading brand in precision GPS for agriculture. The Company is headquartered in Calgary, Alberta, with major product development, sales, and marketing facilities in Arizona, Kansas, and Australia. Hemisphere GPS is listed on the Toronto Stock Exchange (TSX) trading under the symbol "HEM" and is one of the TSX Cleantech designated companies. 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 therefrom.

HEMISPHERE GPS INC.
Consolidated Statements of Operations and Deficit
(unaudited - expressed in U.S. dollars)

	Three months ended		Nine months ended
	September 30,		September 30,
	2010	2009	2010	2009
Sales	$    13,208,451	$      9,068,537	$    43,833,959	$    41,488,850
Cost of sales	7,118,829	5,167,702	24,280,343	20,898,199
	6,089,622	3,900,835	19,553,616	20,590,651
Expenses:
Research and development	2,672,942	2,344,818	7,588,349	6,441,726
Sales and marketing	2,851,790	2,514,406	9,223,702	8,571,404
General and administrative	1,674,873	1,684,214	5,236,663	5,022,275
Stock-based compensation	216,596	218,699	580,321	641,205
Amortization	620,674	830,972	2,308,214	2,307,422
	8,036,875	7,593,109	24,937,249	22,984,032
Loss before undernoted items	(1,947,253)	(3,692,274)	(5,383,633)	(2,393,381)
Foreign exchange loss	33,564	76,320	5,046	245,110
Interest income	(2,539)	(2,163)	(8,604)	(18,843)
Restructuring costs	-	-	207,985	812,186
Net loss	(1,978,278)	(3,766,431)	(5,588,060)	(3,431,834)
Deficit, beginning of period	(43,731,119)	(33,897,596)	(40,121,337)	(34,232,193)
Deficit, end of period	$ (45,709,397)	$ (37,664,027)	$ (45,709,397)	$ (37,664,027)
Loss per common share:
Basic and diluted	$           (0.04)	$            (0.07)	$           (0.10)	$           (0.06)
Weighted average shares outstanding:
Basic and diluted	55,561,667	55,561,667	55,561,667	55,561,667

HEMISPHERE GPS INC.
Consolidated Balance Sheets
(unaudited - expressed in U.S. dollars)

	September 30,	December 31,
	2010	2009
Assets
Current assets:
Cash and cash equivalents	$       7,806,146	$       8,397,418
Accounts receivable	7,240,592	5,986,781
Inventories	17,434,439	17,751,949
Deferred commissions	138,348	187,436
Prepaid expenses and deposits	636,755	628,023
	33,256,280	32,951,607
Deferred commissions	94,054	158,171
Property and equipment	7,458,132	7,905,708
Intangible assets	6,294,469	7,386,776
Goodwill	41,587,519	40,919,957
	$    88,690,454	$     89,322,219
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable and accrued liabilities	$       7,768,613	$      4,030,075
Deferred revenue	920,152	1,242,573
Current portion of capital lease	96,786	89,637
	8,785,551	5,362,285
Deferred revenue	604,911	819,888
Capital lease	189,325	258,426
Shareholders' equity:
Share capital	107,708,468	107,708,468
Contributed surplus	4,434,147	3,853,826
Deficit	(45,709,397)	(40,121,337)
Accumulated other comprehensive income	12,677,449	11,440,663
	79,110,667	82,881,620
	$     88,690,454	$     89,322,219

HEMISPHERE GPS INC.
Consolidated Statements of Cash Flows
(unaudited - expressed in U.S. dollars)

	Three months ended		Nine months ended
	September 30,		September 30,
	2010	2009	2010	2009
Cash flows from (used in) operating activities:
Loss from continuing operations	$ (1,978,278)	$ (3,766,431)	$ (5,588,060)	$ (3,431,834)
Items not involving cash:
Amortization	685,019	895,748	2,535,865	2,486,938
Stock-based compensation	216,596	218,699	580,321	641,205
Unrealized foreign exchange loss	204,657	580,000	2,164	603,120
	(872,006)	(2,071,984)	(2,469,710)	299,429
Change in non-cash operating working capital:
Accounts receivable	1,109,544	2,064,062	(1,151,985)	2,509,540
Inventories	(1,476,824)	813,500	572,053	(2,662,571)
Prepaid expenses and deposits	(179,436)	(14,151)	3,384	40,597
Deferred commissions	26,521	47,685	117,881	92,267
Accounts payable and accrued liabilities	1,712,856	(1,045,652)	3,626,429	(3,561,365)
Foreign currency contract	-	-	-	(3,270,000)
Deferred revenue	(199,704)	(322,232)	(567,035)	(557,097)
	120,951	(528,772)	131,017	(7,109,200)
Cash flows used in financing activities:
Capital lease obligations	(22,800)	-	(67,243)	-
	(22,800)	-	(67,243)	-
Cash flows used in investing activities:
Purchase of property and equipment	(188,516)	(290,169)	(614,432)	(951,817)
Intangible asset additions	(20,894)	(205,014)	(100,774)	(902,314)
	(209,410)	(495,183)	(715,206)	(1,854,131)
Decrease in cash position	(111,259)	(1,023,955)	(715,777)	(8,963,331)
Effect of currency translation on cash balances and cash flows	31,503	123,317	60,160	564,924
Cash and cash equivalents, beginning of period	7,885,902	8,790,906	8,397,418	16,288,675
Cash and cash equivalents, end of period	$    7,806,146	$    7,890,268	$    7,806,146	$    7,890,268

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