The success of 2002 reflects the hard work of everyone at the Company, and a shared commitment to the strategic priorities we put in place during the year. Those strategies stress the importance of making decisions based on maximizing the Company’s return on investment; of doing everything – from product development to sales and marketing – with customer satisfaction as our number one priority; and of ensuring that NovAtel remains a leading provider of precision positioning and augmentation technologies by working closely with technology partners and customers who are leaders in their respective fields. We have managed the Company every day with these priorities in mind and our employees have done an excellent job of translating them into consistently superior performance.

For the year, revenues grew 18% to CDN$33.4 million with net income rising to CDN$1.5 million from CDN$110,000 in 2001. Importantly, we generated positive cash flow in each quarter and ended the year with cash and equivalents of CDN$6.6 million – up significantly from a year earlier. A key undertaking was to manage our balance sheet more efficiently, which we accomplished by reducing inventory levels by 27%, or CDN$1.8 million, despite growing our revenue. Managing our balance sheet more efficiently not only strengthens our financial condition, it also increases our ability to act on strategic opportunities and expand our market presence.

Excellent Progress in Special Applications Business
Over the past 24 months, NovAtel has worked to establish itself as a preeminent OEM supplier of high-precision positioning technology to market leaders and value-added resellers developing solutions for various vertical markets. In 2002, this effort began paying off when AGCO Corporation introduced an automated guidance system in its popular MT Series of Challenger® tractors. This system – which incorporates machine guidance software developed by our strategic partner, BEELINE Technologies, Inc. – is built around NovAtel’s OEM4 dual-frequency GPS receiver and can utilize OmniSTAR’s new high-precision (HP) DGPS service. Initial market response has been very positive, and we believe our supply contract with BEELINE could contribute as much as US$30 million in revenue over the next five years.

To build on our momentum in this vertical market, we have developed the ProPak-LB, our own version of this receiver technology. This new sensor also utilizes the OmniSTAR HP service to deliver real-time decimeter-level accuracy. We are targeting a number of vertical markets with this product, including Geographical Information Systems (GIS), mapping, agriculture and specialized land and air precision navigation markets.

A second positive development in our special applications business during 2002 was the announcement of NovAtel’s strategic partnership with Leica Geosystems AG of Switzerland. Leica is a leading provider of precision GPS-based systems in such vertical markets as surveying and GIS. NovAtel’s role is to provide the core, precision positioning technology that is at the heart of these systems; Leica will continue to develop new applications and sell finished systems through its worldwide distribution network. We believe our partnership with Leica could contribute as much as US$30 million in revenue over the next five years.

NovAtel has been able to develop strong technology partnerships with Leica and other market leaders because we have world-class expertise in dual-frequency GPS technology. But just as important is our proven ability to deliver that technology to our partners at excellent cost/performance ratios and with attributes – such as rapid integration into third-party systems – that can speed design, testing, and market launch of new OEM applications. Our newest high-end receiver, the OEM4-G2L, is a perfect illustration of this ability to meet customer needs.

The OEM4-G2L incorporates NovAtel’s latest patented positioning technology, Pulse Aperture Correlator, to achieve less than 2 cm accuracy in real time. It also offers greatly enhanced connectivity, reduced power consumption, and an optional Application Programming Interface that allows customers to add their own specialized software applications onboard, reducing hardware costs, integration engineering and time-to-market.

In addition to working with OEM customers in our established markets of GIS, surveying and agriculture, we are also exploring various opportunities for the OEM4-G2L with military contractors who are developing weapons-training and unmanned airborne vehicle systems. These defense applications are a relatively new market for our technology, but we are working to develop them into a significant source of revenue for NovAtel in the long term. We will keep you informed on the progress of these programs.

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