AirIQ Inc.
TSX VENTURE : IQ

AirIQ Inc.

July 29, 2011 08:00 ET

AirIQ Announces Results for March 31, 2011

TORONTO, ONTARIO--(Marketwire - July 29, 2011) - AirIQ Inc. ("AirIQ") (TSX VENTURE:IQ), a supplier of wireless location- based services, today announced its financial results for the fifteen months ended March 31, 2011.

"The Company continues to focus on key elements of its strategy", said Don Gibbs, President and Chief Executive Officer of AirIQ, "of building revenues, managing costs and seeking value creating partnerships. During the year we accomplished a tremendous amount, as outlined in the 'Business Review' section below. One of these accomplishments was the changing of our year-end - from December 31st to March 31st, - and so it should be noted that the Company's audited consolidated financial statements include information for a 15 month reporting period and not the usual 12 months. During this period of economic turmoil the Company managed to improve gross profits and continued to reduce expenses. We were also able to settle two lawsuits against the Company."

"Subsequent to the period end, the Company raised $1.3 million in a shareholder rights offering that was fully subscribed. The rights offering was quickly followed with a non-brokered private placement for $416 thousand, 89.9% of which was taken up by officers, directors and insiders of the Company", continued Mr. Gibbs. "We cannot thank our stakeholders enough for their support. We are now in a position to expand our customer base, launch new products and drive to profitability and positive cash flow."

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

Business Review

In January 2010, the Company reduced its Board from seven to four members and reduced the non- executive Board compensation. In June 2010 David Vaughn did not run for re-election and the Board was further reduced to three persons. Subsequent to the period end, on April 30, 2011 Randall Reynolds resigned from the Board and Messrs. Emmanuel Mounouchos and Mathew Wilson were appointed to the Board. The Board of four members then implemented a non-cash payment Board compensation policy and agreed to grant stock options for shares of the Company to compensate its non-executive Board members.

On February 12, 2010, the Company's common shares were listed for trading on the TSX Venture Exchange ("TSXV") under the symbol "IQ". The Company met the requirements to list its common shares on the TSXV as a Tier II company, and the reactivation from the NEX to the TSXV was approved.

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.

At the end of March, 2010, following full transition of services related to the Company's marine business sold in November of 2009, the Company further reduced operating costs by reducing staff and hours in its Client Care operation and infrastructure costs.

On October 7, 2010, the Company entered into a credit agreement with Eventi Credit Inc. ("Eventi") and Mosaic Capital Partners LP ("Mosaic") for a loan of $500.

In January 2011, the Company changed its fiscal year end from December 31st to March 31st resulting in a fifteen (15) month reporting period from January 1, 2010 to March 31, 2011.

On January 27, 2011, the Company filed a Notice of Intention with the securities regulators declaring its intention to be qualified to file a short form prospectus under National Instrument 44-10.

On February 3, 2011, the articles of the Company were amended to consolidate the Company's issued and outstanding common shares on the basis of one (1) post consolidation common share for every forty (40) pre-consolidation shares (the "Consolidation"). As a result, the then issued 174,146,741 common shares were consolidated into 4,353,687 common shares. The exercise price and the number of common shares issuable under all of the Company's outstanding warrants and stock options were also proportionately adjusted upon Consolidation.

On February 28, 2011, the Company filed a short-form prospectus offering 4,353,687 rights to subscribe for up to 8,707,374 common shares of the Company at a price of $0.15 per common share (the "Rights Offering"). (See Subsequent Events – Rights Offering below).

Subsequent Events

Rights Offering

On April 12, 2011, the Company completed the Rights Offering and issued an aggregate of 8,707,374 common shares for $0.15 per share for gross proceeds of approximately $1,306.

Payment on Promissory Notes

On May 3, 2011, the Company paid $125 to each of the Lenders in reduction of the principal amount outstanding on the Promissory Notes. The repayment was made with proceeds from the Rights Offering and in accordance with the terms set out in the short-form prospectus. Following this repayment, the Company owes $125 in principal to each of the Lenders.

Private Placement

On May 31, 2011 the Company closed a non-brokered private placement for 2,772,886 common shares at a price of $0.15 per share, for total consideration of $416 (the "Private Placement").

Following the Rights Offering and the Private Placement, the Company has a total of 15,833,947 common shares issued and outstanding.

Overview

The Company's audited 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 Company's audited consolidated financial statements for the twelve months ended December 31, 2009 also include the accounts of AirIQ's former subsidiaries, AirIQ Marine, Inc. ("AirIQ Marine") and Oceantrac Incorporated.

The Company's audited consolidated financial statements as at and for the fifteen months ended March 31, 2011, including notes thereto, and Management's Discussion and Analysis for the same period were filed with the Canadian securities regulatory authorities on July 29, 2011, 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).

Results of Continuing Operations

Revenues

Revenues for the fifteen months ended March 31, 2011, decreased 30% to $3,697 from $5,257 for the twelve month period ended December 31, 2009.

Revenues received from equipment sold in connection with service contracts are recorded as deferred revenue and recognized over the initial term of the service contract.

Sales of hardware contracts recorded to deferred revenues were approximately $676 during the fifteen month period ended March 31, 2011 compared to $647 during the twelve month period ended December 31, 2009. Revenues recognized from deferred revenues for the fifteen month period ended March 31, 2011 was approximately $722 compared to $1,693 during the twelve month period ended December 31, 2009. The reduction in revenues can be attributed to the expiration of customer hardware contracts that had been deferred from sales in prior periods.

Overall, revenues related to service contracts sold in connection with hardware equipment decreased by $486 from $3,314 for the twelve months ended December 31, 2009 to $2,828 for the fifteen month period ended March 31, 2011. Included in this decrease is approximately $166 related to the difference in the average US dollar exchange rates which decreased from $1.14 for the twelve months ended December 31, 2009 compared to $1.03 for the fifteen months ended March 31, 2011. The remaining difference of $320 is attributable to the expiration of customer contracts and lower sales when compared to the twelve month period ended December 31, 2009.

Included in the Company's reported revenues are sales of lost units of approximately $110 during the fifteen months ended March 31, 2011. Included in the Company's reported 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. Neither of these revenues had any associated direct cost of sales.

Gross Profit

Overall, gross profit for the fifteen months ended March 31, 2011, decreased 14% to $2,273 from $2,639 for the comparative twelve months ended December 31, 2009.

Equipment gross profits increased by approximately $12 to $222 during the fifteen month period ended March 31, 2011 from $210 for the twelve month period ended December 31, 2009 due to a combination of lower hardware and amortization costs.

Service contract gross profits declined by approximately $399 to $2,051 during the fifteen month period ended March 31, 2011 from $2,450 for the twelve month period ended December 31, 2009. Included in this decrease is approximately $163 related to the difference in the average US dollar exchange rates which decreased from $1.14 for the twelve months ended December 31, 2009 compared to $1.03 for the fifteen months ended March 31, 2011. The remaining difference of $236 is attributable to the expiration of customer contracts and lower sales when compared to the twelve month period ended December 31, 2009.

Expenses and Other Items

Sales and marketing, engineering and research and general and administrative expenses totalled $3,285 and $4,159 for the fifteen months ended March 31, 2011 and twelve months ended December 31, 2009, respectively.

Overall these expenses were reduced by $874 for the fifteen months ended March 31, 2011 when compared to the twelve months ended December 31, 2009. Expense reductions were achieved in the following areas; a) wages and related expense reductions of approximately $215 due to the Company's restructuring initiatives completed in 2009, b) travel expense of approximately $151 primarily related to lower personnel due to the restructuring initiatives, c) premise lease savings of approximately $102 due to the relocation of the Company's head office in 2009 and, d) other cost reductions of approximately $406 related to consulting fees, audit fees, director fees, legal fees and other costs.

Net loss

The Company's net loss from continuing operations for the fifteen months ended March 31, 2011 year was $1,263 as compared to a net loss of $3,316 for the twelve months ended December 31, 2009, a decrease of $2,053.

The decrease in net loss period-over-period can be attributed to improvement in the following areas; a) expense reductions of approximately $874, b) reductions in interest expense of $360, c) reductions in amortization of approximately $323, d) reduced impairment of long-lived asset costs of $133, e) reduced restructuring cost of $393, f) reduction of foreign exchange losses of approximately $22 and, g) reduced stock-based compensation expense of $314. The reduction in expenses was partially offset by lower gross profits of $366.

AMENDMENT OF FINANCIAL STATEMENTS

The Company's consolidated financial statements for the year ended December 31, 2009 have been amended for an adjustment to stock based compensation expense to properly reflect the vesting of certain options. The adjustment has been reflected on a retroactive basis, resulting in the following changes to the prior comparative figures from those previously presented:

As Previously As
Reported Adjustment Restated
$ $ $
Contributed Surplus (2,245 ) (164 ) (2,409 )
Deficit (95,984 ) (164 ) (96,148 )
Stock-based compensation 153 164 317
Net loss from continuing operations (3,152 ) (164 ) (3,316 )
Net earnings (loss) and comprehensive
income (loss for the year) 299 (164 ) 135

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 and per share amounts)
March 31, 2011 December 31, 2009
$ $
(amended)
ASSETS
Current
Cash 169 744
Accounts receivable 310 419
Inventory 94 338
Prepaid expenses 304 111
Total current assets 877 1,612
Property, plant and equipment 186 401
Intangible assets 211 392
1,274 2,405
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIENCY)
Current
Accounts payable and accrued liabilities 1,410 1,562
Income taxes payable 130 177
Deferred revenue 379 443
Obligations under capital lease 20 89
Promissory notes 500
Total current liabilities 2,439 2,271
Deferred revenue 116 143
Obligations under capital lease 7 19
Total liabilities 2,562 2,433
Shareholders' equity (deficiency)
Share capital 89,263 89,263
Other paid-in capital 4,448 4,448
Contributed surplus 2,412 2,409
Deficit (97,411 ) (96,148 )
Total shareholders' equity (deficiency) (1,288 ) (28 )
1,274 2,405



AirIQ Inc.
CONSOLIDATED STATEMENTS OF EARNINGS (LOSS)
AND COMPREHENSIVE INCOME (LOSS)
(in thousands of Canadian dollars except share and per share amounts)
15 months ended March 31, 2011 12 months ended December 31, 2009
$ $
(amended)
Revenues 3,697 5,257
Direct cost of sales 1,424 2,618
Gross profit 2,273 2,639
Expenses
Sales and marketing 902 981
Engineering and research 420 472
General and administration 1,963 2,706
Stock-based compensation 3 317
Foreign exchange loss 10 32
3,298 4,508
Loss before the following and discontinued operations (1,025 ) (1,869 )
Interest expense 49 409
Restructuring charges 393
Impairment of long-lived assets 46 179
Amortization 143 466
238 1,447
Net loss from continuing operations (1,263 ) (3,316 )
Net earnings from discontinued operations 3,451
Net earnings (loss) and comprehensive income (loss) for the period (1,263 ) 135
Loss per share from continuing operations
(basic and diluted) (0.29 ) (0.82 )
Earnings (loss) per share from discontinued operations
(basic and diluted) 0.85
Loss per share (basic and diluted) (0.29 ) (0.03 )
AirIQ Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands of Canadian dollars except share and per share amounts)
15 months ended March 31, 2011 12 months ended December 31, 2009
$ $
(amended)
OPERATING ACTIVITIES
Net loss from continuing operations (1,263 ) (3,316 )
Add (deduct) items not involving cash
Stock-based compensation 3 317
Amortization of property, plant and equipment 211 585
Amortization of intangible assets 420 1,211
Impairment loss on disposal of property, plant and equipment 46 200
Other 199
Changes in non-cash balances related to operations
Accounts receivable 109 806
Inventory 244 142
Prepaid expenses (109 ) (2 )
Accounts payable and accrued liabilities (236 ) (1,414 )
Income taxes payable (47 ) (64 )
Deferred revenue (91 ) (1,061 )
Service contract costs (239 ) (341 )
Cash used in operating activities (952 ) (2,738 )
INVESTING ACTIVITIES
Proceeds from disposal of business (net of cash disposed of $341) 2,155
Purchase of property, plant and equipment (48 ) (117 )
Proceeds from disposal of property, plant and equipment 6
Cash provided by investing activities (42 ) 2,038
FINANCING ACTIVITIES
Repayment of obligations under capital lease (81 ) (167 )
Proceeds from issuance of common shares 200
Cost of issuance of common shares (3 )
Repayment of term loan (2,574 )
Proceeds from promissory notes 500
Cash used in financing activities 419 (2,544 )
Effect of foreign exchange on cash (9 )
Net change in cash from continuing operations (575 ) (3,253 )
Net cash used by discontinued operations 1,558
Cash, beginning of period 744 2,439
Cash, end of period 169 744
Supplementary cash flow information
Interest paid 36 410
Non-cash investing and financing transactions
Property, plant and equipment purchased under capital leases 21 4



AirIQ Inc.
CONSOLIDATED STATEMENTS OF CHANGES IN
SHAREHOLDERS' EQUITY (DEFICIENCY)
(in thousands of Canadian dollars except share and per share amounts)
Share capital Other
paid-in

capital
Contributed
surplus
Deficit Total
# $ $ $ $ $
Balance, January 1, 2009 160,813,408 89,066 4,448 2,092 (96,283 ) (677 )
Issued re subscription agreement 13,333,333 197 197
Stock-based compensation 317 317
Net income for the year 135 135
Balance, December 31, 2009
(as amended) 174,146,741 89,263 4,448 2,409 (96,148 ) (28 )
Stock consolidation (169,793,054 )
Stock-based compensation 3 3
Net loss for the period (1,263 ) (1,263 )
Balance, March 31, 2011 4,353,687 89,263 4,448 2,412 (97,411 ) (1,288 )

No Conference Call

AirIQ will not be holding a conference call to discuss results. The Company's financial statements, 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 July 29, 2011.

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 that generate recurring revenues from 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