TORONTO, ONTARIO — (Marketwire) — 07/29/11 — 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 () and on the System for Electronic Document Analysis and Retrieval (“SEDAR”) website ().
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:
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.
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 and at 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 .
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.
Contacts:
AirIQ Inc.
Donald Gibbs
President and Chief Executive Officer
(905) 831-6444, Ext. 4255
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