Azure Dynamics Announces Third Quarter 2010 Results

By Azure Dynamics Corporation, PRNE
Monday, November 8, 2010

OAK PARK, Michigan, November 9, 2010 - Azure Dynamics Corporation (TSX: AZD)(OTC: AZDDF) ("Azure" or the
"Company"), the fast growing hybrid electric and electric power train
innovator for the commercial truck market, today reported its third quarter
financial results for the period ending September 30, 2010. The Company also
provided an update on product development activities.

"Although revenues for the quarter were at the lower-end of our
expectations, we continue to expect sales on the Balance(TM) Hybrid Electric
product for 2010 to hit our targets," said Scott T. Harrison, Azure Dynamics'
chief executive officer. "Sales were impacted by the transition to the
Johnson Controls-Saft battery pack to ensure the Balance(TM) Hybrid Electric
product included the latest lithium-ion technology as well as the other
engineering updates aimed at improving reliability, durability and
efficiency. This new battery pack was the single largest contributor to our
previously stated - and now implemented - product cost reduction plan for the
Balance(TM) Hybrid Electric, which will strengthen gross margins going
forward. We are now well positioned to achieve record revenues in the
fourth quarter led by our substantially lower cost Balance(TM) Hybrid
Electric product."

"The real story for the third quarter is the continuing tireless
contributions from our dedicated, professional and committed employee team,"
continued Harrison. "This effort was led by our strong engineering and
operational staff whose efforts to advance our technology portfolio while
reducing costs contributed directly to gross margin improvement, improved
product performance and bottom line results."

"The Transit Connect Electric continued to charge towards its official
manufacturing launch scheduled for April, 2011," added Harrison. "Since
announcing the Transit Connect Electric LEAD customer program in March, 2010,
six of the 10 LEAD customers in North America have placed orders totaling
more than 90 units, in line with our initial expectations for the 10 LEAD
customers. We expect the remaining four LEAD customers to place orders during
the fourth quarter. In addition, the product was successfully introduced to
the European market with a well publicized appearance at the Hanover, Germany
auto show. The European launch is expected to occur in second quarter of

In October, 2010, the Company obtained a $4 million credit facility to
provide an additional source to help fund working capital requirements. "We
are pleased to complete this financing with competitive terms that reflect
our solid product portfolio and expected future growth," concluded Harrison.

Third Quarter 2010 Highlights

    - Since Q2, 2010, several marquee fleets have joined the Azure Transit
    Connect Electric LEAD customer program with Xcel Energy, New York Power
    Authority, Southern California Edison and Johnson Controls Inc. all
    participating. As these companies show, LEAD customers are not simply
    early adopters, but rather literal leaders in the advancement of electric
    mobility in North America. It is especially noteworthy that major energy
    producers have placed volume orders because these new Azure partners are
    crucial in building the charging infrastructure required to support
    electric vehicles in increasing numbers.

    - Subsequent to the quarter end, Canada Post was named as the first LEAD
    customer in Canada.

    - The Transit Connect Electric participated in Ford Motor Company's
    "Charging Into the Future Electric Vehicle tour," a multi-city tour
    designed to promote electric vehicles and educate consumers about what
    to expect from electrified automobiles.

    - The Transit Connect Electric was showcased to a variety of U.S. federal
    agencies for demonstration drives in Washington D.C. Specifically, the
    Transit Connect Electric visited the Department of Justice, Department of
    Energy, EERE, Clean Cities Coalition, the Department of Defense, the
    United States Postal Service and several congressional staffs where the
    vehicle was seen and driven by a host of decision-makers.

    - Azure's Force Drive(TM) technology made international news by powering
    the winning entry in the prestigious 2010 "X Prize" competition. The
    competition, designed to inspire a new generation of super efficient
    vehicles, required each entrant to perform in an intense multi-stage
    competition. Li-Ion Motors' Wave II, featuring Force Drive(TM), earned
    first place in the highly competitive Alternative Side-by-Side Class.

    - The Transit Connect Electric was a headliner at the CALSTART Hybrid
    Truck User Forum (HTUF) conference in Dearborn, Michigan, an event
    co-sponsored by Azure and Johnson Controls.

    - Michigan's Governor Granholm visited Azure's Oak Park headquarters for
    a well publicized Transit Connect Electric event that included speakers
    from Ford, JCI and AM General. State leadership from the Michigan
    Economic Development Council and the state's Battery Team were in
    attendance. Governor Granholm drove the Transit Connect Electric a few
    weeks later at the "Business of Plugging In" conference in Detroit.

Financial Results

Revenue for the third quarter of 2010 totaled $1.8 million compared to
$3.2 million in the third quarter of 2009. For the nine months ended
September 30, 2010, revenue totaled $8.5 million compared to $5.0 million in
the same period a year ago. Net loss for the third quarter of 2010 was $6.4
, or $(0.01) per share, compared to a loss of $5.7 million or $(0.01)
per share in the third quarter of 2009. Net loss for the nine months ended
September 30, 2010 was $17.4 million, or $(0.03) per share, compared to a
loss of $19.8 million or $(0.05) per share in the same period a year ago.

Before contributions, the Company's engineering, operations and product
development expenses for the quarter totaled $6.7 million (including $3.8
in product development costs), compared to $3.4 million for the same
period in 2009 (including $1.2 million in product development costs). For the
first nine months of 2010, the Company's engineering and R&D expenses totaled
$17.3 million (including $9.6 million in product development costs), compared
to $10.4 million in the same period of 2009 (including $3.2 million in
product development expenses).

As of September 30, 2010, the Company's net cash and cash equivalents
totaled $25.3 million, and working capital totaled $21.7 million, compared to
cash and cash equivalents of $6.5 million, and working capital of $11.1
, as of September 30, 2009.

Third Quarter Product Development Updates

Balance(TM) Hybrid Electric

    - The lithium battery design validation testing progressed on new
    released production level battery packs

    - MY10.5 stripped chassis were produced in the third quarter and will go
    into service in October following the completion of the final lithium
    battery validation tests

    - The shuttle bus MY10.5 variant was released to production within the

    - Design validation testing of the production intent new belt
    starter-generator system continued in the quarter and a production intent
    prototype MY 11 Balance Hybrid vehicle was produced during the quarter at

    - Design released JCS lithium battery service hardware drawings for prior
    model year Balance Hybrid vehicles. The service release fulfills Azure's
    objective to make the new battery technology backwards compatible so that
    existing customers will be able to upgrade to the latest battery

Balance Plug-In Hybrid Electric (PHEV)

    - During the third quarter the Company initiated the development of a
    Plug-In Hybrid variant of the Balance E450

    - Plug-In battery pack requirements were completed and the PHEV battery
    design was initiated, leveraging design work already completed on the
    Transit Connect Electric battery

    - The preliminary PHEV component packaging design has been completed and
    parts have been ordered to commence the first development vehicle build

Transit Connect Electric:

    - Within the third quarter AZD completed the validation prototype vehicle
    builds and commenced testing including accelerated durability at Ford's
    Michigan Proving Grounds and FMVSS brakes certification testing

    - The crash certification vehicles were delivered and are being prepared
    for final certification tests

    - Airbag development testing progressed during the quarter and will be
    finalized in October for final certification tests

    - The first tooling tryout vehicle build was completed at AM General in
    September as the manufacturing line was set up for the pre-production
    build of customer units in the fourth quarter

    - With respect to the European design, the VP level design was released
    within the quarter and the initial vehicles prepared for builds

    - The Company reviewed potential manufacturing partner sites in Europe
    within the quarter and prepared preliminary marketing, sales and service

Low Emission Electric Power (LEEP(TM)):

    - The company continued to produce LEEP(TM) Freeze systems to fulfill
    customer orders for Kidron

    - Delivered four additional LEEP(TM) Lift systems to Altec for further

Force Drive(TM) Electric Components:

    - The Company continued to progress on performance and specification
    upgrades to its inverters

    - Validation prototype builds were completed for the European variant of
    the liquid-cooled inverter for the Transit Connect Electric and the
    validation testing commenced including component and vehicle level EMI
    performance testing

    - An upgraded drive inverter software feature release was completed in
    the quarter implementing improvements for Transit Connect Electric

    - The Company started the pre-production build for the Transit Connect
    Electric liquid-cooled drive inverters

Sales and Marketing Highlights:

    - On October 22, Azure announced the appointment of John Formisano to its
    Board of Directors. Formisano recently retired from Federal Express
    Corporation where he served as Vice President - Global Vehicles.
    Formisano is also Chairman of the Board of CALSTART.

    - On October 7, Azure and Ford announced that New York Power Authority
    (NYPA), the nation's largest state public power organization, was added
    to the LEAD customer program for the innovative Ford Transit Connect
    Electric van.

    - On October 6, Azure announced the sale of 10 Balance(TM) Hybrid
    Electric trucks to TruGreen, the nation's largest lawn care provider and
    operator of one of the country's largest private vehicle fleets.

    - On September 29, Azure Dynamics and Ford Motor Company announced that
    Southern California Edison (SCE) was the newest addition to the Ford
    Transit Connect Electric LEAD customer program with a 20 unit order. SCE
    is one of the nation's largest electric utilities and operates one of the
    world's most sophisticated fleets of alternative powered vehicles.

    - On September 22, Johnson Controls, already an Azure Dynamics partner in
    vehicle development, was added to the LEAD customer program with a 20
    unit order.

    - On September 8, Xcel Energy and a coalition of its customers were
    selected to be among the first in the country to receive the all-electric
    Ford Transit Connect Electric commercial van. As part of the Lead
    Customer program, Xcel Energy will receive a total of 13 vans.


"We anticipate a continued, albeit gradual, economic recovery for the
commercial businesses that we sell to," said Harrison. "These fleets need
replacement vehicles and are increasingly looking towards the type of
efficient and eco-friendly product Azure provides. Government stimulus
programs add further incentive for fleets to purchase advanced energy
solutions now. With our technological and cost advancements in the third
quarter, Azure is better prepared than ever to meet this added demand with
quality products that can be produced and sold at a profit."

The Company's fiscal 2010 third quarter financial statements and MD&A are
available at or on the Company's website at

Azure will host a conference call to discuss third quarter 2010 earnings
today, Tuesday, November 9th at 5:00 p.m. eastern time. Interested listeners
can access the call toll free at 1-800-786-7015 and should call in at least
fifteen minutes before the scheduled start time.

About Azure Dynamics

Azure Dynamics Corporation (TSX: AZD)(OTC: AZDDF) 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 a variety of partners and customers. The Company
is committed to providing customers and partners with innovative,
cost-efficient, and environmentally-friendly energy management solutions. For
more information please visit

The TSX Exchange does not accept responsibility for the adequacy or
accuracy of this release.

Forward-looking Statements

This press release contains forward-looking statements related to Azure's
financial and other projections, expected future plans, events, financial and
operating results, objectives and performance, as well as underlying
assumptions, all of which involve risks and uncertainties. When used in this
press release, the words "believe", "anticipate", "intend", "estimate",
"expect", "project" and similar expressions are intended to identify
forward-looking statements, although not all forward-looking statements
contain such words. These statements reflect management's current beliefs and
are based on information currently available to Azure's management and are
subject to certain risks, uncertainties and assumptions. Actual results may
differ materially from management expectations as projected in such
forward-looking statements for a variety of reasons and no assurances can be
given as to actual future results, performance or prospects. Factors that may
cause such differences include, but are not limited to: the early stage of
development of the Company; a lack of product revenues and a history of
losses; the need for additional financing; uncertainty as to commercial
viability; uncertainty as to product development and commercialization
milestones being met; uncertainty as to the market for the Company's products
and unproved acceptance of the Company's technologies; competition;
uncertainty as to target markets; dependence upon third parties; changes in
environmental policies; uncertainty as to patent and proprietary rights;
availability of management and key personnel; available regulatory approvals;
and conflicts of interest by directors and officers of the Company. More
detailed information about these and other factors that could affect Azure's
operations or financial results are included in Azure's filings with Canadian
securities regulatory authorities. Azure does not assume any obligation to
update or revise any forward-looking statements, whether as a result of new
information, future events or otherwise, except as required by law. Because
of these risks, uncertainties and assumptions, readers should not place undue
emphasis on Azure's forward-looking statements.

                                                   Azure Dynamics Corporation
                                                  Consolidated Balance Sheets
    (Stated in thousands of Canadian dollars, except per share amounts and
     number of shares)

                                           September 30 December 31
                                               2010        2009
    As at                                 (unaudited)   (audited)
                                                 $           $

      Cash and cash equivalents                24,259      33,588
      Accounts receivable                       1,375       2,632
      Inventory (Note 3)                        8,677       5,215
      Prepaid expenses                          1,092         974
                                               35,403      42,409

    Restricted cash                             1,032       1,041
    Property and equipment                      5,513       5,277
    Other assets                                  122           -
    Intangible assets                           5,888       6,755
    Goodwill                                    2,932       2,932

                                               50,890      58,414


     Accounts payable and accrued              13,333       9,837
     Customer deposits & deferred                 176         746
     Current portion of notes payable              67          66
     Current portion of obligations                92          99
     under capital leases
                                               13,668      10,748
      Obligations under capital leases            117         117
      Customer deposits & deferred                594         644
      Notes payable                             1,962       2,055
                                               16,341      13,564
    Shareholders' equity
      Share capital (Note 4)                  208,574     202,250
      Contributed surplus (Note 4)              7,880       7,139
      Deficit                                (181,905)   (164,539)
                                               34,549      44,850

                                               50,890      58,414

    Nature of operations and going concern (Note 1)
    Commitments (Note 6)
    Subsequent Events (Note 8)
    Approved on behalf of the Board:

    "signed D. Campbell Deacon" Director
    D. Campbell Deacon

    "signed James C. Gouin" Director
    James C. Gouin

                                                Azure Dynamics Corporation
    Consolidated Statements of Operations, Comprehensive Loss, and Deficit
    (Stated in thousands of Canadian dollars, except per share amounts and
                                                         number of shares)

                       For the three months ended   For the nine months ended
                                    September 30               September 30
                                    (unaudited)                 (unaudited)

                                2010          2009        2010          2009
                                 $             $           $             $

    Revenues                   1,830         3,168       8,545         4,969

    Cost of sales              1,968         3,529       8,551         7,039

    Gross margin                (138)         (361)         (6)       (2,070)

    Engineering, research,
    development and related
    costs, net                 4,002         3,395       9,520        10,509
    Selling and marketing        553           519       1,641         1,504
    General and
    administrative             2,030         1,859       6,585         6,005
    Total expenses             6,585         5,773      17,746        18,018

    Loss from operations      (6,723)       (6,134)    (17,752)      (20,088)

    Interest and other
    income, net                  136           136         408           423
    Interest expense             (23)          (26)        (73)          (85)
    Other income/(expense)         -            24           -          (594)
    Foreign currency gains       189           308          51           569

    Net loss and comprehensive
    loss for the period       (6,421)       (5,692)    (17,366)      (19,775)

    Deficit, beginning of
    period                  (175,484)     (150,814)   (164,539)     (136,731)

    Deficit, end of period   181,905      (156,506)   (181,905)     (156,506)

    Loss per share - basic
    and diluted                (0.01)        (0.01)      (0.03)        (0.05)

    Weighted average number
    of shares - basic and
    diluted              626,739,390   410,241,505 613,434,616   389,787,339

                                                Azure Dynamics Corporation
                                     Consolidated Statements of Cash Flows
    (Stated in thousands of Canadian dollars, except per share amounts and
                                                         number of shares)

                      For the three months ended  For the nine months ended
                            September 30                   September 30
                             (unaudited)                    (unaudited)
                           2010          2009             2010          2009
                             $             $                $             $

    Cash flows from
    operating activities
    Net loss for the
    period               (6,421)       (5,692)         (17,366)      (19,775)
    Adjustments for:
    Amortization of
    property and equipment  269           254              758           789
    Amortization of
    intangible assets       328           354              982         1,056
    Unrealized foreign
    currency gains         (219)         (279)            (156)         (362)
    Stock option
    compensation expense    110            69              579           332
    Deferred share units
    compensation expense     63            64              179           186
                         (5,870)       (5,230)         (15,024)      (17,774)

    Changes in non-cash
    working capital
    items                (1,169)       (1,193)             658           248
    Total cash flows
    from operating
    activities           (7,039)       (6,423)         (14,366)      (17,526)

    Cash flows from
    financing activities
    Issuance of common
    shares (net of costs)    13         9,395            6,305         9,395
    Principal payments
    on notes payable        (16)          (17)             (49)          (53)
    Repayment of obligations
    under capital lease     (36)          (36)            (130)         (131)
    Other assets           (122)            -             (122)            -
    Total cash flows from
    financing activities   (161)        9,342            6,004         9,211

    Cash flows from
    investing activities
    Acquisition of property
    and equipment          (333)          (67)            (868)         (103)
    Acquisition of
    intangible assets       (46)          (35)            (114)         (160)
    Sale of property and
    equipment                 -             -                -            35
    Changes in restricted
    cash                     (1)           35              (13)           97
    Total cash flows from
    investing activities   (380)          (67)            (995)         (131)

    Increase/(Decrease) in
    cash and cash
    equivalents          (7,580)        2,852           (9,357)       (8,446)

    Exchange impact on
    cash held in foreign
    currency                 20             2               28           (60)

    Cash and cash
    equivalents, beginning
    of period            31,819         2,443           33,588        13,803

    Cash and cash
    equivalents, end
    of period            24,259         5,297           24,259         5,297

    Supplemental cash
    flow information

    Cash paid for
    interest                 23            26               73            85
    Cash paid for taxes       -             -               13             -
    Non cash investing and
    financing activities:
    Vehicles and equipment
    acquired under capital
    lease                     -            24              126            24

For further information:

Juris Pagrabs, Vice President, Investor Relations, +1(248)298-2403 ext
7570 Email:

Pat Liebler, Liebler Group, +1(313)832-4376


Juris Pagrabs, Vice President, Investor Relations, +1(248)298-2403 ext 7570 Email: jpagrabs at, Pat Liebler, Liebler Group, +1(313)832-4376
Email: pat at

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