TMX group

Gross margin increases from 35% to 50%

Toronto Stock Exchange Symbol: CSY
www.csi-wireless.com

CALGARY, Aug. 9 /CNW/ - (TSX:CSY): CSI Wireless Inc., a designer and
manufacturer of advanced GPS products, today reported a 45% increase in
revenues for the second quarter ended June 30, 2006, as Hemisphere GPS
revenues were a record for the Company at $16.9 million with gross margins of
$8.4 million - also a record for the Company. CSI's increasing operating
strength as a pure-play GPS Company is evident in non-GAAP earnings of
approximately 15% before restructuring costs and foreign exchange losses. This
provides an indicator of the future earnings potential of CSI over the longer
term.
As previously announced, CSI made the strategic decision to focus its
resources on its GPS product lines, where it is as a market leader with
significant competitive advantages and intellectual property. Accordingly, on
May 8, 2006, the Company closed the sale of its Fixed Wireless Telephone
product line to Telular Corporation of Vernon Hills, Illinois. On July 28,
2006, CSI announced the sale of its Location-Tag(TM) Telematics product to
Trace Technologies LLC, a wholly owned subsidiary of Nebraska based Gabriel
Technologies Corporation. CSI is also in discussions with buyers regarding its
remaining Telematics business assets.
Michael Lang, CSI's interim CEO explained: "We are making good progress
with our strategic re-focusing of CSI into a pure-play GPS company. We
continue growing and optimizing our Hemisphere GPS business where we see our
greatest defensible strengths and our greatest opportunities while we complete
the divestiture of the remaining wireless assets. We will enter 2007 as a
focused, efficient, pure-play GPS player."

2006 Second Quarter Financial Results

For the three months ended June 30, 2006, Hemisphere GPS revenue was a
record at $16.9 million, an increase of 45% relative to revenues of
$11.6 million for the same period of 2005 and 9% over revenues of $15.5
million in the first quarter of 2006. The increases are due to strong demand
for its agricultural guidance and precision products focused on the marine and
GIS markets. Revenue growth of 45% compared to the second quarter of 2005 was
tempered by the decline in the US dollar, which weakened by 10% compared to
the average rate for the three month period ended June 30 2005. Substantially
all of the Company's revenues are denominated in US dollars.
The Company experienced continued strong demand for its Outback products,
including the recently introduced Outback S2 and the Outback eDrive. The
Company's precision products line, focused on the marine and GIS markets, also
saw improved revenue relative to 2005 - with increased sales of Vector heading
sensor products as well as other products now incorporating the Company's
Crescent(TM) GPS technology announced in 2005.
Hemisphere GPS gross margins for the 2006 second quarter were a Company
record at $8.4 million compared to $4.0 million in the second quarter of 2005
and $6.2 million in the first quarter of 2006.
Percentage margins increased to 50% from 35% for the same period in 2005
and 40% in the first quarter. The increased margins are the result of a
depletion of acquisition inventory step-up costs associated with the
acquisition of the Outback Business and improved margins from new ground
agriculture products reflecting the Company's Crescent(TM) GPS technology
announced in 2005.
Total operating expenses for the second quarter increased by $1.3 million
over the same period in 2005. Research and development expenses increased by
$294 thousand relative to the second quarter of 2005 as a result of increased
investment in new product development to support the increasing focus on our
GPS business. Sales and marketing expenses increased by $615 thousand compared
to the second quarter of 2005 related to the acquisitions of the Del Norte and
Outback businesses, increased sales employee commissions resulting from
increased revenues, as well as the opening of two new Outback sales offices in
targeted North American sales territories. General and administrative expenses
increased by $237 thousand.
Restructuring costs of $1.0 million were recorded in the second quarter
of 2006 associated with senior management changes and corporate restructuring
activities related to the transition to a pure-play GPS company. The Company
realized a foreign exchange loss of $762 thousand during the second quarter of
2006 compared to a foreign exchange gain of $56 thousand in 2005. This loss
relates primarily to the impact of a weakening US dollar on the translation of
US dollar denominated working capital into Canadian dollars.
The continuing operations of the Hemisphere GPS product lines generated
earnings of $762 thousand dollars in the second quarter of 2006 compared to a
loss of $487 thousand in the second quarter of 2005.
As a result of the discontinuance of the Fixed Wireless Telephone and
Telematics product lines, the Company generated a net loss from discontinued
operations of $2.9 million for the quarter compared to a loss of $615 thousand
in 2005. The loss includes severance and wind-down provisions of $2.0 million
associated with completing the sale of the wireless activities and winding
down the operations.
The Company reported a consolidated net loss of $2.2 million, or ($0.05)
per share (basic and diluted) in the second quarter of 2006, compared to a net
loss of $1.1 million, or ($0.03) per share (basic and diluted) in the second
quarter of 2005.

Non-GAAP Financial Measures

The following non-GAAP financial measures are intended to supplement the
overall understanding of CSI's current financial performance and its prospects
for the future. These non-GAAP financial measures are not intended to
supersede or replace the Company's GAAP financial results. Non-GAAP earnings
from continuing operations and Non-GAAP diluted EPS from continuing operations
do not have any standardized meaning prescribed by GAAP and are therefore
unlikely to be comparable to similar measures presented by other issuers.

<<
                                                          Quarter Ended
                                                       ------------------
                                                        Jun 30    Jun 30
(000's)                                                   2006      2005
-------------------------------------------------------------------------
GAAP earnings (loss) from continuing operations,
 before restructuring costs, foreign exchange,
 interest and taxes                                    $ 2,473   $  (604)

Amortization of acquisition inventory step-up cost         111     1,596
-------------------------------------------------------------------------
-------------------------------------------------------------------------

Non-GAAP earnings from continuing operations,
 before restructuring costs, foreign exchange,
 interest and taxes                                      2,584       992

Restructuring costs, foreign exchange, interest
 and taxes                                               1,711      (117)
-------------------------------------------------------------------------

Non-GAAP earnings from continuing operations               873     1,109
-------------------------------------------------------------------------
-------------------------------------------------------------------------

Non-GAAP diluted EPS from continuing operations,
 before restructuring costs, foreign exchange
 and interest                                          $  0.06   $  0.02
-------------------------------------------------------------------------
-------------------------------------------------------------------------

Non-GAAP diluted EPS from continuing operations        $  0.02   $  0.03
-------------------------------------------------------------------------
-------------------------------------------------------------------------

GAAP diluted EPS from continuing operations            $  0.02   $ (0.01)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
>>

The Company excludes the amortization of acquisition inventory step-up
charges from the calculation of its non-GAAP financial measures. As previously
disclosed, the inventory acquired as part of the acquisition of the Outback
business is recorded under GAAP at the carrying cost of the seller (RHS) at
the time of the acquisition, which includes the margin that CSI earned on the
sale of the product to RHS. As a result, the gross margin earned on sales of
the acquired inventory will include only the share of margins previously
earned by RHS until the inventory on hand at the date of the acquisition has
been sold. Thereafter, margins on Outback product sales will reflect the
combined margins previously earned by both CSI and RHS.
The total margin reflected in the purchased inventory is referred to as
the "acquisition inventory step-up cost". In order to improve the
comparability of the periods impacted by the acquisition inventory step-up
cost, and those that are not impacted, management is reporting the amount of
"acquisition inventory step-up cost" that has impacted the cost of sales each
quarter. During the second quarter of 2006, the final acquired inventory was
sold, and therefore, the balance of unamortized inventory step-up cost at the
end of the quarter was nil. As this step-up cost has now been amortized,
future periods will no longer be impacted by this adjustment.
Detailed financial results for the quarter and management's discussion
and analysis can be found on SEDAR, at www.sedar.com.

Conference Call - Wednesday August 9th at 11:00AM EST

A Web cast and conference call for shareholders, analysts and other
members of the investment community has been scheduled for today at 11:00 a.m.
Eastern Time to discuss the financial results and provide updates on
operations.
To participate, please dial 1-800-218-0204 approximately 10 minutes
before the conference call.

Please note that a live Web cast of the call will be available on the CSI
Wireless Web site at
http://www.csi-wireless.com/investors/conference_calls.shtml.
The Web cast will be archived there for later review.

A recording of the call will be available through August 16. Please dial
1-877-289-8525 and enter the reservation number 21199344 followed by the
number sign to listen to the rebroadcast.

About CSI Wireless

CSI Wireless designs and manufactures innovative, cost-effective GPS
products for applications in agriculture, marine and other markets. CSI is a
leader in several high-growth markets. The Company owns leading brand names,
numerous patents, and other intellectual property and has licensed its
technology to manufacturers of chipsets and GPS receivers. The Company's head
office is in Calgary, Alberta, and it has major product development and sales
and marketing facilities in Arizona, Kansas and Texas. For more information
about CSI, go to www.csi-wireless.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 CSI Wireless's 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. CSI Wireless's 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 CSI
Wireless will derive therefrom.

<<
CSI WIRELESS INC.
Consolidated Statements of Operations and Deficit
(unaudited)

-------------------------------------------------------------------------
                      Three months ended           Six months ended
                            June 30,                    June 30,
                  --------------------------- ---------------------------
                          2006          2005          2006          2005
-------------------------------------------------------------------------
Sales             $ 16,906,522  $ 11,641,968  $ 32,420,557  $ 21,415,429

Cost of sales        8,527,815     7,622,299    17,839,429    12,280,199
-------------------------------------------------------------------------
                     8,378,707     4,019,669    14,581,128     9,135,230

Expenses:
  Research and
   development       1,227,480       933,171     2,397,616     1,866,170
  Sales and
   marketing         2,341,897     1,727,265     5,160,966     2,387,980
  General and
   administrative    1,531,524     1,294,526     2,861,553     2,336,976
  Stock-based
   compensation        185,816       169,830       329,119       314,326
  Amortization         618,978       499,162     1,205,904       696,278
  -----------------------------------------------------------------------
                     5,905,695     4,623,954    11,955,158     7,601,730

-------------------------------------------------------------------------
Earnings (loss)
 before undernoted
 items               2,473,012      (604,285)    2,625,970     1,533,500
Restructuring
 costs               1,043,000             -     1,043,000             -
Foreign exchange
 (gain) loss           761,764       (55,866)      828,374       (88,593)
Interest income        (93,949)      (16,140)     (109,776)      (51,353)
-------------------------------------------------------------------------
Earnings (loss)
 before income tax     762,197      (532,279)      864,372     1,673,446

Current income tax
 recovery                    -       (45,000)            -             -
-------------------------------------------------------------------------
Earnings (loss)
 from continuing
 operations            762,197      (487,279)      864,372     1,673,446

Loss from
 discontinued
 operations         (2,929,263)     (614,948)  (12,186,261)   (1,458,839)
-------------------------------------------------------------------------
Net earnings
 (loss)             (2,167,066)   (1,102,227)  (11,321,889)      214,607

Deficit,
 beginning of
 period            (40,134,969)  (17,625,824)  (30,980,146)  (18,942,658)

-------------------------------------------------------------------------
Deficit, end of
 period           $(42,302,035) $(18,728,051) $(42,302,035) $(18,728,051)
-------------------------------------------------------------------------
-------------------------------------------------------------------------

Earnings per
 common share
 from continuing
 operations:
  Basic           $       0.02  $      (0.01) $       0.02  $       0.05
  Diluted         $       0.02  $      (0.01) $       0.02  $       0.04
-------------------------------------------------------------------------
-------------------------------------------------------------------------

Earnings per
 common share:
  Basic and
   diluted        $      (0.05) $      (0.03) $      (0.25) $       0.01
-------------------------------------------------------------------------
-------------------------------------------------------------------------

Weighted average
 shares outstanding:
  Basic             45,926,078    40,039,943    45,912,790    36,102,781
  Diluted           45,926,078    41,846,955    45,912,790    37,909,792
-------------------------------------------------------------------------
-------------------------------------------------------------------------



CSI WIRELESS INC.
Consolidated Balance Sheets
(unaudited)

-------------------------------------------------------------------------
                                                  June 30,   December 31,
                                                     2006           2005
-------------------------------------------------------------------------

Assets
Current assets:
  Cash                                       $ 12,354,706   $ 12,595,354
  Accounts receivable                           3,770,469      3,400,719
  Inventories                                  10,674,154     11,030,410
  Prepaid expenses and deposits                   327,953        550,621
  Marketable securities                         6,159,692              -
  Current assets of discontinued operations     5,316,936     11,045,664
  -----------------------------------------------------------------------
                                               38,603,910     38,622,768

Deferred commissions                              283,911         24,472
Property and equipment                          6,117,773      6,189,739
Intangible assets                               4,666,735      4,727,733
Goodwill                                       22,961,432     22,394,799
Assets of discontinued operations                 519,250     18,229,059

-------------------------------------------------------------------------
                                             $ 73,153,011   $ 90,188,570
-------------------------------------------------------------------------
-------------------------------------------------------------------------

Liabilities and Shareholders' Equity

Current liabilities:
  Accounts payable and accrued liabilities   $  3,570,085   $  2,999,227
  Deferred revenue                                242,076              -
  Current portion of long-term debt               480,618        483,134
  Current portion of capital lease
   obligations                                    285,184        284,922
  Current liabilities of discontinued
   operations                                   2,621,852     10,969,890
  -----------------------------------------------------------------------
                                                7,199,815     14,737,173

Deferred revenue                                1,707,314        222,413
Long-term debt                                     43,193        300,672
Capital lease obligations                         241,762        408,411

Shareholders' equity:
  Share capital                               103,900,015    103,463,383
  Contributed surplus                           2,362,947      2,036,664
  Deficit                                     (42,302,035)   (30,980,146)
  -----------------------------------------------------------------------
                                               63,960,927     74,519,901

-------------------------------------------------------------------------
                                             $ 73,153,011   $ 90,188,570
-------------------------------------------------------------------------
-------------------------------------------------------------------------



CSI WIRELESS INC.
Consolidated Statements of Cash Flows
(unaudited)

-------------------------------------------------------------------------
                      Three months ended           Six months ended
                            June 30,                    June 30,
                  --------------------------- ---------------------------
                          2006          2005          2006          2005
-------------------------------------------------------------------------

Cash flows from
 (used in)
 operating
 activities:
  Earnings (loss)
   from
   continuing
   operations     $    762,197  $   (487,279) $    864,372  $  1,673,446
  Items not
   involving cash:
    Amortization       618,978       499,162     1,205,904       696,278
    Stock-based
     compensation      185,816       169,830       329,119       314,326
    Unrealized
     foreign
     exchange loss     (18,034)            -        (4,106)            -
  -----------------------------------------------------------------------
                     1,548,957       181,713     2,395,289     2,684,050

  Change in
   non-cash
   operating
   working capital:
    Accounts
     receivable        980,763      (808,819)     (348,652)     (971,515)
    Inventories       (476,053)    2,075,420       483,537     2,406,002
    Prepaid
     expenses and
     deposits          253,359        43,480       222,668        80,094
    Deferred
     commissions      (118,129)            -      (259,439)            -
    Accounts
     payable and
     accrued
     liabilities    (2,687,601)      821,490       442,298       391,625
    Deferred
     revenue          (954,483)      (45,000)    1,726,977             -
  -----------------------------------------------------------------------
                    (1,453,187)    2,268,284     4,662,678     4,590,256
    Cash from
     (used) in
     discontinued
     operations     (1,005,808)    1,399,823    (6,012,987)   (1,226,312)
  -----------------------------------------------------------------------
                    (2,458,995)    3,668,107    (1,350,309)    3,363,944

Cash flows from
 (used in)
 financing
 activities:
  Long-term debt      (127,008)     (139,223)     (255,889)     (139,223)
  Capital lease
   obligations         (99,773)          221      (166,387)      (43,819)
  Issue of share
   capital, net
   of share issue
   costs               237,975    16,347,007       330,699    16,956,222
  Cash from
   (used in)
   discontinued
   operations        3,277,061      (459,664)    2,977,665      (897,947)
  -----------------------------------------------------------------------
                     3,288,255    15,748,341     2,886,088    15,875,233

Cash flows used
 in investing
 activities:
  Purchase of
   property and
   equipment          (189,791)     (288,954)     (700,090)     (542,047)
  Business
   acquisition,
   net                       -   (12,754,510)     (959,302)  (12,754,510)
  Cash used in
   discontinued
   operations          (45,437)     (912,635)     (117,035)   (1,139,097)
-------------------------------------------------------------------------
                      (235,228)  (13,956,099)   (1,776,427)  (14,435,654)

-------------------------------------------------------------------------
Increase
 (decrease) in
 cash position         594,032     5,460,349      (240,648)    4,803,523

Cash, beginning
 of period          11,760,674     9,596,614    12,595,354    10,253,440

-------------------------------------------------------------------------
Cash, end of
 period           $ 12,354,706  $ 15,056,963  $ 12,354,706  $ 15,056,963
-------------------------------------------------------------------------
-------------------------------------------------------------------------

Supplemental
 disclosure:
  Interest paid   $     24,924  $    116,894  $     53,844  $    142,055
  Interest
   received       $    125,228  $     52,949  $    194,434  $    104,094
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>>