AirIQ Inc.
TSX VENTURE : IQ

AirIQ Inc.

April 30, 2010 16:30 ET

AirIQ Announces 2009 Year End Results

TORONTO, ONTARIO--(Marketwire - April 30, 2010) - AirIQ Inc. ("AirIQ") (TSX VENTURE:IQ), a supplier of Wireless Location- Based Services specializing in Telematics, today announced its financial results for the year ended December 31, 2009.

"2009 was a challenging year for the Company", said Don Gibbs, President and Chief Executive Officer of AirIQ, "and a year of important transition. The dramatic downturn in the economy had a large impact on the Company's customers and that, coupled with increased competitive markets, resulted in increased subscriber churn and marketing challenges. However, we were able to complete a number of initiatives which we believe better positions the Company for future success."

"We have executed a number of cost cutting measures to bring our cost structure more in line with our revenue expectations", continued Mr. Gibbs, "and we continue to look for ways to reduce operating expenses. The Company is committed to achieving profitability and positive cash flow from its existing operations and continues to seek opportunities to form strategic partnerships to create value for the shareholders."

Business Review

In July of 2009, the Company moved its head office to a less expensive facility resulting in a substantial rent reduction. In addition, throughout 2009, the Company reduced operating expenses through the implementation of various cost cutting measures.

On November 30, 2009, the Company sold its U.S. subsidiary, AirIQ Marine, Inc. ("AirIQ Marine") for gross proceeds of $2,650,000. Proceeds from the sale of the subsidiary were used to repay the Company's outstanding term loans and for working capital purposes.

In addition, on November 30, 2009, the Company closed a private placement for 5,333,333 Units for gross proceeds of $200,000.

Also on November 30, 2009, Mr. Stephen Willey resigned as President and Chief Executive Officer of the Company following the divestiture of AirIQ Marine, further reducing the Company's corporate overhead.

Subsequent to the year end, in January 2010, the Company reduced its Board from seven members to four members and reduced the Board compensation.

The Company had negotiated a transition services agreement in conjunction with the sale of AirIQ Marine which was terminated by both parties on March 31, 2010. As a result, the Company was able to further reduce staff and hours in its Client Care operation as well as infrastructure costs.

In March 2010, the Company announced the re-launch of its consumer solution, MobileIQ, with the intention of expanding its subscriber base throughout North America. Also in March 2010, the Company launched a monthly rental program to enter an attractive niche in the marketplace.

Key elements of the Company's strategy are as follows:

  1. Build revenues and manage costs to achieve sustained profitability and positive cash flow;
  2. Maximize shareholder value through the strategic repositioning of the Company's assets;
  3. Continue to re-negotiate supplier contracts and focus on efficiency improvements;
  4. Economically resolve outstanding legal claims; and
  5. Continue to seek opportunities to form value creating strategic partnerships.

Subsequent Events

Transfer from NEX to TSV

On February 12, 2010, the Company's common shares were listed for trading on the TSX Venture Exchange (the "TSV") under the symbol "IQ". The Company met the requirements to list its common shares on the TSV as a Tier 2 company, and the reactivation from the NEX to the TSV was approved. The NEX is a separate board of the TSV for companies previously listed on the TSV or Toronto Stock Exchange and provides a forum for the trading of publicly listed companies while they assess and potentially undertake transactions.

Amendment of Warrants

On March 25, 2010, the Company applied to extend the term of the 5,333,333 common share warrants issued to Mosaic Capital Partners L.P. ("Mosaic") from one year to five years, as agreed pursuant to a Subscription Agreement between the Company and Mosaic. The TSV approved the application to extend the term of the warrants from one year to five years provided that the exercise price of the warrants for years two through five increases from $0.05 to $0.10 in compliance with TSV policies. Mosaic agreed and the warrants have been amended to extend the term to November 30, 2014. The exercise price of the warrants was also amended so that during the first year of the term the exercise price for the 5,333,333 warrants is $0.05 per warrant and thereafter the exercise price is $0.10 per warrant.

Patent Infringement Claim

On April 9, 2010, a dismissal of a patent infringement complaint filed by LunarEye Inc. against the Company was filed in the United States District Court for the Eastern District of Texas. The terms of the settlement between the Company and LunarEye are confidential, but include a release in favour of AirIQ for any future actions related to the matter, a lump sum payment, and no admission of infringement of the subject patents.

Overview

The accompanying condensed consolidated financial statements include the accounts of AirIQ and its subsidiaries, AirIQ U.S. Holdings, Inc. ("AirIQ Holdings"), AirIQ U.S., Inc. ("AirIQ USA"), and AirIQ, LLC ("AirIQ LLC"). All inter-company balances and transactions have been eliminated on consolidation. The accompanying consolidated financial statements also include the accounts of AirIQ's former subsidiaries, AirIQ Marine, Inc. and Oceantrac Incorporated, and are presented for the eleven months ended November 30, 2009 and for the twelve months ended December 31, 2008, comparatively.

The Company's audited consolidated financial statements as at and for the year ended December 31, 2009, including notes thereto, and the accompanying Management's Discussion and Analysis were filed with the Canadian securities regulatory authorities on April 30, 2010, and will be available on the Company's website (www.airiq.com) and on the System for Electronic Document Analysis and Retrieval ("SEDAR") website (www.sedar.com).

Unless otherwise noted herein, all following references to dollar amounts are in thousands of Canadian dollars, except share information.

Results of Continuing Operations

Revenues

Revenues for the year ended December 31, 2009, decreased 23% to $5,257 from $6,829 for the comparative year ended December 31, 2008.

Revenues received from equipment sold in connection with service contracts are recorded as deferred revenue and recognized over the expected life of the equipment on a straight-line basis. The reduction in revenues year-over-year can be attributed to the expiration of customer hardware contracts that had been deferred from sales in prior periods. Sales of hardware contracts for the twelve month period ended December 31, 2009 added to deferred revenues were approximately $647 (2008 - $1,609). The reduction in sales of hardware contracts can be attributed to the volatile and uncertain economic environment and resulting pressures on customer budgets, as well as increased competition. Revenues recognized from deferred revenues for the twelve month period ended December 31, 2009 were approximately $1,693 (2008 - $3,338).

Included in the revenues for the twelve month period ended December 31, 2009 was a one-time amount of $100 related to revenues associated with a dealer revenue sharing program. This revenue did not have any associated direct costs of sales.

The average U.S. dollar exchange rate increased to $1.14 for the year ended December 31, 2009 from $1.07 for the year ended December 31, 2008. The difference in the average US dollar exchange rates had an estimated notional positive effect on the Company's annual revenues of approximately $362. As a result, revenues decreased by approximately $1,934 without the effect of the U.S. exchange impact.

Gross Profit

Gross profit for the year ended December 31, 2009, increased 34.4% to $2,639 from $1,963 for the comparative year ended December 31, 2008.

Included in direct cost of sales for the twelve months ended December 31, 2009 is an inventory provision of $132 compared to $384 in the same twelve month period the previous year. The reduction in inventory provision year-over-year has had a positive impact of $244 on gross profits for the twelve month period ended December 31, 2009.

Also, gross profits improved by $100 related to revenues associated with a dealer revenue sharing program. This revenue did not have any associated direct cost of sales.

The difference in the average US dollar exchange rates had an estimated notional positive effect on the Company's annual gross profit of approximately $58.

In addition, the Company negotiated more favourable service contract terms with its wireless service providers that resulted in saving of approximately $179 for the twelve months ended December 31, 2009 when compared to the same period the previous year.

Gross profit was further improved by approximately $134 during the twelve months ended December 31, 2009 as compared to the same period in 2008 due to lower wireless costs resulting from the expiration of customer service contracts.

Expenses and Other Items

Sales and marketing, engineering and research and general and administrative expenses totalled $4,159 and $7,796 for the years ended December 31, 2009 and December 31, 2008, respectively.

Overall these expenses were reduced by $3,637 for the year ended December 31, 2009 when compared to the previous year. Expense reductions were achieved in the following areas; a) wages and related expense reductions of approximately $1,705 due to the Company's restructuring initiatives completed in December 2008, b) bad debt expense of approximately $925, c) premise lease savings of approximately $214 due to the relocation of the Company's head office in 2009, (d) consulting fees of approximately $155, (e) reduced legal fees of approximately $160, and (f) other general net cost reductions of approximately $140.

Foreign Exchange

For the twelve months ended December 31, 2009, the Company recorded foreign exchange loss of $32 compared to a foreign exchange gain of $62 for the same twelve month period the previous year.

Net Interest

Net interest expense for the year ended December 31, 2009, was $409 compared to $493 for the year ended December 31, 2008.

The decrease in net interest expense for the year ended December 31, 2009 compared to the previous year is primarily due to the repayment of the outstanding principal of the term loans on November 30, 2009. As a result, the Company did not incur interest charges for the month of December 2009.

Restructuring charges

In 2009, the Company finalized severance arrangements with its former President and Chief Executive Officer. As a result the Company recorded a restructuring charge of $393 (2008 - $802). Amounts remaining to be paid under this severance arrangement as at December 31, 2009 is approximately $119. This amount was paid by the Company subsequent to the year end.

Depreciation and Amortization

Amortization for the year ended December 31, 2009, was $466 compared with $463 for the year ended December 31, 2008.

The increase in depreciation and amortization year-over-year was primarily due to the write-offs related to customer contracts of $91 and license fees of $11.

Net loss from continuing operations

The Company's net loss from continuing operations for the year was $3,152 as compared to a net loss of $8,015 in the prior year, a decrease of $4,863.

The decrease in net loss year-over-year can be attributed to a combination of improvements in gross profit of approximately $676 (see Gross Profit above), expense reductions of approximately $3,637 (see Expenses and Other Items above), reductions in stock-based compensation of approximately $46, restructuring charges of approximately $409 and reduction in special committee charges of approximately $287. These improvements were partially offset by an impairment charge of approximately $179 and foreign exchange weakening of approximately $94.

Net earnings (loss)

The net earnings for the year ended December 31, 2009 was $299, or $nil per share, compared with net loss of $8,153, or ($0.05) per share, for the year ended December 31, 2008.

Liquidity and Capital Resources

As at December 31, 2009, the Company had cash on hand of $744 and negative working capital of $216. Working capital has been calculated by netting current assets and current liabilities excluding deferred revenue that are non-cash items.

The Company has incurred significant losses in prior years, but realized net earnings of $299 for the year ended December 31, 2009, and has an accumulated deficit of $95,984.

The Company's continuation as a going concern is uncertain and will depend upon its ability to achieve profitable operations, the successful implementation of the Company's business strategy, the availability of strategic partnerships or financing alternatives, an acceptable outcome to the Company's contingencies and upon its ability to obtain additional financing or equity in the future. The outcome of these matters cannot be predicted at this time. The Company will need to raise cash in order to meet the needs of its existing operations.

The accompanying condensed consolidated financial statements do not include any adjustments to the amounts and classification of assets and liabilities that may be necessary should the Company be unable to continue as a going concern.

AirIQ Inc.  
   
CONSOLIDATED BALANCE SHEETS  
(in thousands of Canadian dollars except share information)  
   
As at December 31        
  2009   2008  
  $   $  
   
ASSETS        
Current        
Cash 744   906  
Accounts receivable 419   1,154  
Inventory 338   480  
Prepaid expenses 111   109  
Assets of discontinued operations   3,079  
Total current assets 1,612   5,728  
Property, plant and equipment 401   1,069  
Intangible assets 392   1,262  
Assets of discontinued operations   2,575  
  2,405   10,634  
   
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIENCY)      
Current        
Accounts payable and accrued liabilities 1,562   2,914  
Income taxes payable 177   241  
Deferred revenue 443   948  
Obligations under capital lease 89   138  
Current portion of term loans   1,053  
Liabilities of discontinued operations   2,714  
Total current liabilities 2,271   8,008  
Deferred revenue 143   699  
Obligations under capital lease 19   112  
Term loans   1,348  
Liabilities of discontinued operations   1,144  
Total liabilities 2,433   11,311  
   
Shareholders' equity (deficiency)        
Share capital 89,263   89,066  
Other paid-in capital 4,448   4,448  
Contributed surplus 2,245   2,092  
Deficit (95,984 ) (96,283 )
Total shareholders' equity (deficiency) (28 ) (677 )
  2,405   10,634  
AirIQ Inc.  
   
CONSOLIDATED STATEMENT OF EARNINGS (LOSS)  
AND COMPREHENSIVE INCOME (LOSS)  
(in thousands of Canadian dollars except share information)  
   
Years ended December 31        
   
  2009   2008  
  $   $  
   
Revenues 5,257   6,829  
Direct cost of sales 2,618   4,866  
Gross profit 2,639   1,963  
   
Expenses        
Sales and marketing 981   1,231  
Engineering and research 472   2,050  
General and administration 2,706   4,515  
Stock-based compensation 153   199  
Foreign exchange loss (gain) 32   (62 )
  4,344   7,933  
Loss before the following and discontinued operations (1,705 ) (5,970 )
Interest expense 409   493  
Restructuring charges 393   802  
Impairment of long-lived assets 179    
Special committee charges   287  
Amortization 466   463  
  1,447   2,045  
Net loss from continuing operations (3,152 ) (8,015 )
Net earnings (loss) from discontinued operations 3,451   (138 )
Net earnings (loss) and comprehensive income (loss) for the year 299   (8,153 )
   
Loss per share from continuing operations        
  (basic and diluted) (0.02 ) (0.05 )
Earnings (loss) per share from discontinued operations        
  (basic and diluted) 0.02    
Loss per share (basic and diluted)   (0.05 )
AirIQ Inc.  
   
CONSOLIDATED STATEMENTS OF CASH FLOWS  
(in thousands of Canadian dollars except share information)  
   
Years ended December 31        
  2009   2008  
  $   $  
   
OPERATING ACTIVITIES        
Net loss from continuing operations (3,152 ) (8,015 )
Add (deduct) items not involving cash        
  Foreign exchange loss on restricted cash     (92 )
  Stock-based compensation 153   199  
  Amortization of property, plant and equipment 585   717  
  Amortization of intangible assets 1,211   2,858  
  Loss on disposal of capital assets 200    
  Other 199   175  
Changes in non-cash balances related to operations        
  Accounts receivable 806   2,912  
  Inventory 142   457  
  Prepaid expenses (2 ) 55  
  Accounts payable and accrued liabilities (1,414 ) (2,445 )
  Income taxes payable (64 ) (198 )
  Deferred revenue (1,061 ) (1,521 )
  Service contract costs (341 ) (999 )
Cash used in operating activities (2,738 ) (5,897 )
   
INVESTING ACTIVITIES        
Proceeds from disposal of business (net of cash disposed of $341) 2,155    
Release of proceeds from restricted cash to cash   2,039  
Purchase of property, plant and equipment (117 ) (121 )
Cash provided by investing activities 2,038   1,918  
   
FINANCING ACTIVITIES        
Repayment of obligations under capital lease (167 ) (159 )
Proceeds from issuance of common shares 200    
Cost of issuance of common shares (3 )  
Repayment of short-term loan (2,574 ) (426 )
Repayment of obligations for service contracts   (86 )
Cash used in financing activities (2,544 ) (671 )
   
Effect of foreign exchange on cash (9 ) 43  
   
Net change in cash from continuing operations (3,253 ) (4,607 )
Net cash used by discontinued operations 1,558   2,926  
Cash, beginning of year 2,439   4,120  
Cash, end of year 744   2,439  
Less cash - discontinued operations   (1,533 )
Cash, continuing operations – end of year 744   906  
   
Supplementary cash flow information        
Cash interest 410   402  
Non-cash investing and financing transactions        
  Property, plant and equipment purchased under capital leases 4   70  
AirIQ Inc.  
   
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS'  
EQUITY (DEFICIENCY)  
(in thousands of Canadian dollars except share information)  
   
      Other Contributed        
  Share capital paid-in surplus Deficit   Total  
      capital          
  # $ $ $ $   $  
   
   
Balance, January 1, 2008 160,813,408 89,066 4,448 1,893 (88,130 ) 7,277  
Stock-based compensation 199   199  
Net loss for the year (8,153 ) (8,153 )
Balance, December 31, 2008 160,813,408 89,066 4,448 2,092 (96,283 ) (677 )
Issued re subscription agreement 13,333,333 197   197  
Stock-based compensation 153   153  
Net income for the year 299   299  
Balance, December 31, 2009 174,146,741 89,263 4,448 2,245 (95,984 ) (28 )

No Conference Call

AirIQ will not be holding a conference call to discuss results. The Company's annual report, including complete financial statements and Management's Discussion and Analysis will be available on the Company's website www.airiq.com and at www.sedar.com by end of day April 30, 2010.

About AirIQ

AirIQ currently trades on the TSX Venture Exchange under the symbol IQ. AirIQ's office is located in Pickering, Ontario, Canada. The Company offers a suite of location based services (LBS) that yield recurring revenues for each device deployed. AirIQ delivers services to two primary markets: Commercial Fleets and dealers that service Consumer segments. AirIQ provides vehicle owners with the ability to monitor, manage and protect their mobile assets. Services include: instant vehicle locating, boundary notification, automated inventory reports, maintenance reminders, security alerts and vehicle disabling and unauthorized movement alerts. For additional information on AirIQ or its products and services, please visit the Company's website at www.airiq.com.

Forward-looking Statements

This news release contains forward-looking information based on management's best estimates and the current operating environment. These forward-looking statements are related to, but not limited to, AirIQ's operations, anticipated financial performance, business prospects and strategies. Forward-looking information typically contains statements with words such as "hope", "goal", "anticipate", "believe", "expect", "plan" or similar words suggesting future outcomes. These statements are based upon certain material factors or assumptions that were applied in drawing a conclusion or making a forecast or projection as reflected in the forward-looking statements, including AirIQ's perception of historical trends, current conditions and expected future developments as well as other factors management believes are appropriate in the circumstances. Such forward-looking statements are as of the date which such statement is made and are subject to a number of known and unknown risks, uncertainties and other factors, which could cause actual results or events to differ materially from future results expressed, anticipated or implied by such forward-looking statements. Such factors include, but are not limited to, changes in market and competition, technological and competitive developments and potential downturns in economic conditions generally. Therefore, actual outcomes may differ materially from those expressed in such forward-looking statements. Forward-looking statements are provided for the purpose of providing information about management's current expectations and plans relating to the future. Readers are cautioned that such information may not be appropriate for other purposes. Other than as may be required by law, AirIQ disclaims any intention or obligation to update or revise any such forward-looking statements, whether as a result of such information, future events or otherwise.

Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

Contact Information

  • AirIQ Inc.
    Donald Gibbs
    President and Chief Executive Officer
    (905) 831-6444, Ext. 4255
    dgibbs@airiq.com