“2007 was a pivotal year with many key accomplishments for Azure,” said Scott T. Harrison, Chief Executive Officer. “We have delivered product to end users in our three areas of strategic focus; general delivery, shuttle buses and electric drive solutions. Our executive ranks and Board have been bolstered by industry veterans and we completed additional equity financing to allow us to commercialize our product technology in 2008.”

Key 2007 Milestones

• Purolator Courier Ltd. increased order to 105 P1 parallel hybrid delivery vehicles;
• Agreement completed with FedEx Express to develop hybrid-electric powertrains for their commercial delivery fleet;
• Signed a commercial development and cooperation agreement with a major fleet, which became Azure’s third lead customer for the P1 parallel hybrid delivery vehicle;
• Met target of four lead customers by year end when Florida Power and Light becomes Azure’s fourth lead customer by signing a commercial development and cooperation agreement for Azure’s P1 parallel hybrid delivery vehicle;
• Executed supply agreement with Electro Autos Eficaces (“EAE”) of Mexico to convert 1,000 electric vehicle systems for Mexico City’s municipal automobile fleet;
• Finalized agreement with Kidron Inc. (“Kidron”) for supply and marketing of Low Emission Electric Power ("LEEP") systems in refrigerated trucks;
• Canadian facility in Vancouver, B.C. became certified to the ISO 9001:2000 Quality Management System standard;
• Established new head office and development center in Oak Park, Michigan;
• Awarded the 2007 Deloitte Technology Green 15 as a top performer in environmental technology;
• Completed equity financing in October for $30.0 million in gross proceeds.

Financial Results

Revenue for the fourth quarter of 2007 totaled $0.5 million compared to $3.0 million in the fourth quarter of 2006. For the year ended December 31, 2007 revenue decreased to $2.8 million compared to $5.8 million in 2006. Net loss for the fourth quarter of 2007 totaled $8.4 million, or $(0.03) per share compared to a loss of $5.0 million or $(0.03) per share in the fourth quarter of 2006. For the year ended December 31, 2007, the Company’s net loss was $30.2 million, or $(0.14) per share, compared to a net loss of $23.4 million, or $(0.14) per share in 2006.

Before contributions, the Company’s engineering, research and development (“R&D”) expenses in the quarter totaled $5.0 million (including $2.7 million in product development costs), compared to $5.1 million for the same period in 2006 (including $2.7 million in product development costs). For the year ended December 31, 2007, the Company’s engineering and R&D expenses totaled $17.8 million (including $10.0 million in product development costs) compared to $17.6 million in 2006 (including $10.8 million in product development costs).

As of December 31, 2007, the Company’s cash and cash equivalents totaled $24.1 million and working capital totaled $32.3 million, compared to cash and cash equivalents of $27.2 million and working capital of $32.4 million as at December 31, 2006. During the year, the Company completed an equity financing, raising net proceeds of $27.8 million to fund ongoing product development, operations and working capital.

Corporate

On April 17, 2007, Azure announced the appointment of Mr. Scott T. Harrison, as Chief Executive Officer. Mr. James J. Padilla, former President and Chief Operating Officer of the Ford Motor Company, was appointed to the Board of Directors in May 2007. Subsequently, Mr. Harrison appointed Mr. Curt Anthony Huston as Chief Operating Officer and Mr. Ryan Carr as Chief Financial Officer.

On September 19, 2007, Azure established its new corporate headquarters in Oak Park, Michigan, in order to position the business closer to key partners and automotive industry leaders.

“The key executive appointments added considerable experience to an already talented management team,” Mr. Harrison said. “Add to that our changes to the Board of Directors and our headquarters relocation into the heart of the auto industry and Azure is positioned to move to the next level of product development and commercialization.”

Product Development

Azure has formed significant relationships with industry leaders to increase penetration into its target markets and advance its product development programs. For example, the Company has established arrangements with Ford Motor Company, StarTrans (a business division of Supreme Corporation) and Utilimaster Corporation, which has facilitated a concentration of the Company’s efforts around its core programs for series-hybrid (G1) and parallel-hybrid (P1) delivery vans and shuttle buses.

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

• Purolator completed the introduction of 30 new hybrid delivery vans into their fleet operations in the first part of 2007; their combined fleet of Azure hybrid vehicles now totals 49 and have accumulated more than a half million miles in service.
• Azure delivered nine G1 hybrid shuttle buses (CitiBus Hybrid Senator HD or “CitiBus”) to customers in New York. The Company has since completed the assembly of 35 additional cab-chassis with 24 more to be completed in the first half of 2008.
• On November 29, 2007, the Company successfully completed the Federal Transit Administration’s new model bus durability testing of the G1 Citibus at the certification test facility in Altoona, Pennsylvania. The successful completion of this test qualifies Azure’s gasoline hybrid drive system for federally-supported hybrid bus purchases by public transit agencies across the United States.

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

• During 2007, Azure advanced the P1 parallel hybrid vehicle through the initial concept phase; including the build and testing of alternative design prototypes. Initial demonstration prototypes were completed and delivered to customers for in-service trials in the second half of 2007 and early 2008. It is intended, subject to formal agreement, to distribute the hybridized chassis through Ford’s distribution channels.

LEEP Product

• Azure is in the process of designing and building the initial prototype of the LEEP system with a refrigerated truck body supplied by Kidron. The LEEP system has the potential to replace the ancillary motor/generators used in the other method of cooling refrigerator trucks, thereby reducing fuel consumption, noise and emissions. The Company anticipates initial deliveries under this supply agreement will commence in 2008.

Other Product Developments

• On April 9, 2007, the Company entered into a supply agreement with Electro Autos Eficaces of Mexico (“EAE”) to deliver 1,000 electric drive systems for integration into the Nissan Tsuru sedan for use in Mexico City’s municipal fleet. The first converted vehicle was completed in April 2007 and was unveiled at the International Electric Vehicle Forum on May 8, 2007 in Mexico City.

Conclusion

Mr. Harrison added, “2007 was a tremendous year for Azure Dynamics. We have launched best-in-class products, with market leading partners, to allow us to deliver product to world-class customers. The development of our key markets and our organization has us looking forward to 2008 and beyond.”