NovAtel made strong, steady progress on many fronts in 2001. We expanded our market presence in both the Aerospace/Defense and Special Applications markets, building on our recognized position as a leading provider of high-precision GPS technology. We improved our operating efficiency with a series of cost-control measures. We established promising collaborations with other industry leaders. We continued to develop new, highly advanced products for next-generation precision positioning applications. Most important, we generated solid sales growth while returning the Company to profitability for the first time since 1997.

For the year, revenues grew 14% to CDN$28.2 million, and we reported net income of CDN$110,000, or CDN$0.01 per share. Clearly we are pleased with the improvement in our results, and we are encouraged that our sales trends and profitability have continued into 2002. The two business segments that drove growth were Aerospace/Defense and Special Applications.

Growth in Special Applications for Precision Positioning System Components
NovAtel made excellent progress during the year in our development of precision positioning technology for use in third-party OEM solutions. This business, which forms the backbone of our Company, has been growing steadily – a reflection of our ability to take high-end technology and customize it to specific customer needs – and in 2001 we continued to expand our customer base. We also took several significant steps toward accelerating the growth of this part of our business.

In May we began collaborating with a leading developer of precision guidance systems for agricultural machinery and by November we were delighted to announce that our OEM partner, BEELINE Technologies, Inc. of California, had signed a supply agreement with Caterpillar Agricultural Products Inc. BEELINE’s tractor guidance system, built around our OEM4 receiver, is to be a factory installed option on the MT Series of Challenger® Tractors. Design, assembly and marketing rights for the MT Series of tractors was recently acquired by AGCO Corporation of Duluth, Georgia, one of the world’s largest manufacturers of tractors and farming equipment. This relationship with BEELINE is expected to result in an anticipated $40 million of business over six years. The decision to install GPS and auto guidance systems as standard factory equipment marks a significant change in the industry perception of GPS technology. Once viewed as an aftermarket option only, adoption of the technology by large Original Equipment Manufacturers shows a maturing of the market and NovAtel anticipates leveraging this relationship in meeting other customers’ needs.

During late 2001 we began negotiations which resulted in an announcement in early 2002 of a strategic co-operation agreement with Leica Geosystems AG of Switzerland. Two years earlier, NovAtel technology had been selected by a major player in the geomatics industry, Sokkia Co., Ltd. of Japan. This announcement with Leica further validates NovAtel as a leading technology provider to this industry. Leica Geosystems was an industry pioneer and is a leader in advanced satellite-based surveying systems. Their leadership in precision solutions, applications and worldwide distribution will result in a substantial increase in NovAtel’s penetration of this important precision market.

Continued Leadership in Aerospace/Defense GPS Applications
Over the past decade, NovAtel has become a proven supplier of high-end GPS receiver technology to government agencies in the United States, Europe, Japan and China. These networks are replacing outdated radio-based aircraft navigation infrastructure with GPS-based systems for civil aviation systems. NovAtel has become the world leader in the critical receiver technology at the heart of these new satellite-based systems, and in 2001 we booked another large sale of receivers to China’s SNAS program and delivered our first six production receivers to Europe’s EGNOS program.

In addition to these continuing infrastructure projects, we also strengthened our presence in the Aerospace/Defense market by establishing NovAtel technology as an integral component in the so-called “local” GPS-based augmentation systems that are intended to be the next generation of commercial aircraft landing systems. Where the first generation systems provided in-flight positioning and tracking applications, the local systems now being developed will improve the accuracy, reliability and safety of approach and landing. In 2001, NovAtel signed contracts with both Raytheon Company Navigation and Landing Systems and Thales ATM Inc., which parallel our relationship with Honeywell International Inc. through our majority owner CMC Electronics Inc. These three major corporations are expected to be the principle suppliers to this new landing infrastructure. Our OEM4 positioning technology is expected to be central to these next generation systems.

We feel these relationships have established NovAtel as the de facto provider of advanced GPS receivers for commercial ground aviation applications. Accordingly, we are poised to benefit from further government spending, both on first-generation systems – many countries are only just now starting to implement GPS-based aircraft navigation systems – and on development of the new local systems. While the initial design work for the new systems will generate engineering contract revenue for the Company in the near term, the long-term potential for NovAtel, as a major supplier of receivers for aviation applications, is extremely exciting.

Other Business
Point, Inc., our joint venture with Sokkia Co., Ltd. continued in a new product development and release phase through 2001 and had a challenging year. Point now is in a position to go forward with a full line of competitive products. In early 2002, Point began refocusing its resources on sales and distribution of these products and we fully expect significant performance improvement.

In mid-2001, NovAtel increased our ownership position in Mezure, Inc. to 74%. Mezure is an early-stage development company focused on the deformation monitoring market. We were pleased to announce that Keith Price, a recognized construction industry executive, joined the company as President and CEO. In the fourth quarter, Mezure successfully completed its first system installation on the Dames Point Bridge in Jacksonville, Florida. Currently, Mezure is seeking its first major round of outside financing to fund the expected growth of this market. We remain excited about the opportunity in this emerging market.

A Bright Future
We want to take this opportunity to welcome our newest board member, Charles R. Trimble, to NovAtel. Charlie is one of the pioneers of the GPS industry. His insights and experience are extremely valuable to the Company at this stage of its development, and we are delighted to have him as part of our team. I also want to thank David E. Vaughn, who served as the Company’s President and CEO last year. Dave came to NovAtel to focus the Company on growth and profitability, and he established a successful strategy to accomplish this. That strategy is now paying dividends and we intend to not only see it through, but to also build upon it.

We also want to thank all NovAtel employees, who are the driving force behind all of the Company accomplishments last year. In 2001, our employees accepted an across-the-board 10% pay cut. At the end of the fourth quarter, we were delighted to reinstate their pay and their commitment was a major reason why the Company regained profitability and maintained its momentum into 2002.

Finally, on behalf of all of us at NovAtel, we want to express our appreciation for the patience and support of our shareholders during these past difficult times. We firmly believe 2001 was a turning point for the Company, and we look forward to reporting on our continued progress in the months ahead.

Jonathan W. Ladd
President and Chief Executive Officer
April 2002