AirIQ Announces 2007 Fourth Quarter and Year End Results

Year of Change and Renewal

TORONTO, ONTARIO -- (MARKET WIRE) -- 03/28/08 -- AirIQ Inc. ("AirIQ") (TSX: IQ), a leader in Wireless Location-Based Services, specializing in Telematics and Security, today announced its financial results for the fourth quarter and year ended December 31, 2007.

"At this time last year, AirIQ had just completed the successful sale of certain assets and liabilities of its Vehicle Finance business and had set the stage for a year of substantial change and renewal", said Steve Willey, President and Chief Executive Officer. "Further actions during 2007 included recruiting of a seasoned Board, a re-focusing and consolidating of roles throughout the Company, adding key functions to the senior management team, rationalizing the existing service portfolio and building from it three new services that would be expected to fuel new sales in 2008."

"This exciting pace of activity internal to AirIQ was in contrast to less desirable economic factors that affected many Canadian companies," continued Mr. Willey. "In AirIQ's case, these challenges included a substantial negative cost impact due to an unusually strong Canadian dollar, a softening of demand from its U.S. customer base, and a sudden decline in its stock price. Management took several actions in response to these challenges including the appointment by the Board on November 22, 2007 of a Special Committee to review strategic alternatives available to AirIQ to maximize value to the existing shareholders. The scope of the review included potential financing activities as well as the opportunity for mergers or acquisitions by other companies in the Telematics industry or private equity firms. Paradigm Capital Inc. was engaged to provide advisory and banking services."

Highlights

Management Review

- In the first quarter of 2007, the Company sold certain assets and liabilities of its vehicle finance business for approximately $22.3 million. The transaction improved the strength of its balance sheet; as an example $6.9 million of funds was immediately applied to repay senior secured debt. The sale also supported a key decision to focus resources on opportunities that could generate higher monthly average revenue per unit ("ARPU").

- Upon conclusion of the sale of certain assets and liabilities in March 2007 of the Company's vehicle finance business, management reduced certain operating expenses. On November 20, 2007 and after fulfilling support obligations relating to the asset sale, the Company announced a further 23% reduction in its workforce. Improvements in business processes enabled further expense reductions. A strong desire to reduce AirIQ's cost exposure in the face of the strengthening Canadian dollar contributed to the need to reduce expenses in Canada.

- Consistent with the goal of improving ARPU, the Company accelerated development of a new Commercial Fleet asset management system. Before the end of the year the Company delivered a competitive product that featured a state of the art mapping system.

- Concurrently the Company embarked on development of a next generation Heavy Equipment telematics solution and has successfully launched the system into construction, oil and gas, and related markets.

- In response to market interest, AirIQ invested in the development of a web-based Consumer Stolen Vehicle Recovery ("SVR") system. The resulting service simplifies the sales process and minimizes the Company's credit risk.

- In the fourth quarter the Company added two new persons to its executive team: Irwin Rodrigues was hired to oversee marine and consumer applications from the Company's U.S. facility in San Diego; and Brian Bowyer was recruited to lead AirIQ's vehicle telematics business and quality assurance programs.

Financial Highlights

- Recorded a gain on sale of certain assets and liabilities of vehicle finance business of approximately $4.0 million.

- Operating expenses were reduced by approximately $4.5 million or 24.7% year over year from $18.2 million to $13.7 million excluding foreign exchange loss and stock-based compensation.

- Cash position at December 31, 2007 was approximately $6.0 million (including restricted cash of approximately $1.9 million) compared to $2.3 million at December 31, 2006, representing a 161% increase.

- Employee headcount was reduced from 123 to 59, or 52% year over year.

- Foreign exchange loss increased from approximately $0.1 million in 2006 to approximately $2.2 million in 2007 due to progressive strengthening of Canadian dollar. The Company responded by reducing expenses at its Canadian office.

- Direct cost of sales were affected by certain adjustments due to a write-down of analog equipment assets and inventory provisions.

- Working capital improved by $6.9 million year over year from a negative working capital position of approximately $1.4 million at December 31, 2006 to a positive working capital of approximately $5.5 million at December 31, 2007.

Overview

The accompanying condensed consolidated financial statements of loss and deficit are presented for the three months and twelve months ended December 31, 2007 and December 31, 2006, comparatively, and include the operating results of AirIQ Inc. and its subsidiaries, AirIQ U.S. Holdings, Inc. ("AirIQ Holdings"), AirIQ U.S., Inc. ("AirIQ USA"), AirIQ Marine, Inc. ("AirIQ Marine" or "Boatracs"), Oceantrac Incorporated ("Oceantrac") and AirIQ, LLC ("AirIQ LLC"). The Company's audited consolidated financial statements as at and for the year ended December 31, 2007, including notes thereto, and the accompanying Management's Discussion and Analysis were filed with the Canadian securities regulatory authorities on March 28, 2008; and will be available on the Company's website (www.airiq.com) and are available on the System for Electronic Document Analysis and Retrieval ("SEDAR") website (www.sedar.com).

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

Revenues

Revenues for the year ended December 31, 2007, decreased 41.0% to $23.9 million from $40.5 million for the comparative year ended December 31, 2006.

The year-over-year decrease in revenues resulted primarily from the transfer of certain customers and customer contracts upon the sale of certain assets and liabilities of the Company's subsidiary, AirIQ USA relating to its vehicle finance industry tracking business to CalAmp DataCom, Inc. ("CalAmp") on March 16, 2007. In addition, the year over year fluctuation on the average U.S. dollar exchange rate had an estimated notional effect on the Company's annual revenues in excess of $1.3 million.

Revenues for the three months ended December 31, 2007, decreased by 60.8% to $4.0 million from $10.2 million for the three months ended December 31, 2006, and decreased by 14.9% from $4.7 million, for the three months ended September 30, 2007. The quarter-over-quarter decrease was primarily due to lower replacement part orders and lost unit charges to customers.

Gross Profit

Gross profit for the year ended December 31, 2007, decreased 53.2% to $7.4 million from $15.8 million for the comparative year ended December 31, 2006. The year-over-year decrease in gross profit was primarily the result the sale of certain assets and liabilities of the Company's subsidiary, AirIQ USA relating to its vehicle finance business to CalAmp DataCom, Inc. ("CalAmp") on March 16, 2007.

Gross profit for the three months ended December 31, 2007, decreased by 81.1% to $0.7 million from $3.7 million for the three months ended December 31, 2006, and decreased by 58.8% from $1.7 million, for the three months ended September 30, 2007. The primary reasons for the fluctuation in gross profit were due to an adjustment to the gain on the sale of certain assets and liabilities of the Company's vehicle finance business to CalAmp, an inventory provision and the write-down of analog assets.

Expenses and Other Items

Expenses totalled $16.2 million and $18.7 million for the years ended December 31, 2007 and December 31, 2006, respectively. The year over year decrease in operating expenses is primarily due to the integration of the Company's operating segments following the sale of certain assets and liabilities of the Company's subsidiary, AirIQ USA, relating to its vehicle finance industry tracking business to CalAmp on March 16, 2007.

Included in expenses for the twelve months ended December 31, 2007, is an unusual bad debt reserve taken in the third quarter of 2007 in the amount of approximately $0.6 million recorded in conjunction with management's review of its entire customer base and estimated collectability of accounts from subscribers that had been on the Company's analog system.

For the twelve months ended December 31, 2007, the Company recorded foreign exchange losses of $2.2 million and stock-based compensation expense of $0.3 million. This compares with recorded foreign exchange losses of $0.1 million and $0.3 million in stock-based compensation expense for the twelve months ended December 31, 2006. The strengthening of the Canadian dollar relative to the U.S. dollar during 2007 was the primary reason for the year-over-year increase in foreign exchange expenses.

Net Interest

Net interest expense for the year ended December 31, 2007, was $1.1 million compared to net interest expense of $1.4 million for the year ended December 31, 2006.

Net interest charges were reduced year-over-year primarily due to the repayment of both the revolving operating loan and its secured debenture during the first quarter of 2007. In addition, the Company earned interest revenue of approximately $0.2 million for the twelve months ended December 31, 2007. No interest was earned during the twelve months ended December 31, 2006.

Total cash and accreted interest for the year ended December 31, 2007 totaled $1.3 million less interest earned of $0.2 million. Other charges

Restructuring charges in the amount of approximately $0.6 million and $0.3 million for the years ended December 31, 2007 and December 31, 2006, respectively, relate primarily to the integration of the Company's operating segments following the sale of certain assets and liabilities relating to its vehicle finance industry tracking business to CalAmp on March 16, 2007.

Amortization

Amortization for the year ended December 31, 2007, was $1.3 million compared with $2.9 million for the year ended December 31, 2006. The year over year decrease in the amortization was primarily due to the sale of certain assets to CalAmp on March 16, 2007 related to property, plant and equipment and customer contracts. In addition, certain assets had been fully amortized early in 2007.

Net Loss

The net loss for the year ended December 31, 2007 was approximately $7.9 million, or ($0.05) per share, compared with $7.6 million, or ($0.05) per share, for the year ended December 31, 2006.

Liquidity and Capital Resources

As at December 31, 2007, the Company had unrestricted cash of $4.1 million and positive working capital of $5.5 million compared to a negative working capital of $1.4 million as at December 31, 2006. Working capital has been calculated by netting current assets and current liabilities, deferred revenue and obligations for service contracts that are non-cash items.

The Company has incurred significant losses, including $7.9 million for the year ended December 31, 2007, and has an accumulated deficit of approximately $87.6 million as at December 31, 2007.

Since the Company has continued to incur losses, the Company's continuation as a "going concern" is uncertain and may depend upon its ability to achieve profitable operations 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 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 Canadian dollars)

As at December 31

2007 2006 $ $ ---------------------------------------------------------------------------ASSETS Current Cash 4,119,903 2,292,475 Restricted cash 1,946,461 -Accounts receivable 5,489,983 7,250,744 Inventory 1,009,439 1,717,630 Prepaid expenses 163,764 499,244 ---------------------------------------------------------------------------Total current assets 12,729,550 11,760,093 ---------------------------------------------------------------------------Property, plant and equipment, net 1,804,501 2,923,896 Intangible assets, net 1,995,534 5,218,400 Goodwill 1,985,391 16,620,353 Deferred financing costs, net - 288,692 Deferred service contract costs, net 2,875,268 7,693,961 --------------------------------------------------------------------------- 21,390,244 44,505,395 ------------------------------------------------------------------------------------------------------------------------------------------------------ LIABILITIES AND SHAREHOLDERS' EQUITY Current Accounts payable and accrued liabilities 6,297,641 8,795,943 Income taxes payable 240,997 202,736 Revolving operating loan - 3,900,000 Deferred revenue 2,307,291 8,391,081 Obligations for service contracts 64,715 547,878 Obligations under capital lease 178,905 244,085 Current portion of term loan 462,494 ----------------------------------------------------------------------------Total current liabilities 9,552,043 22,081,723 ---------------------------------------------------------------------------Deferred revenue 1,598,788 1,200,350 Obligations for service contracts 14,696 78,869 Obligations under capital lease 194,406 155,656 National Research Council loan - 82,304 Term loan and secured debenture 2,208,374 5,443,997 ---------------------------------------------------------------------------Total liabilities 13,568,307 29,042,899 --------------------------------------------------------------------------- Shareholders' equity Share capital 89,066,171 89,072,046 Other paid-in capital 4,447,754 4,447,754 Contributed surplus 1,892,576 1,588,469 Deficit (87,584,564) (79,645,773) ---------------------------------------------------------------------------Total shareholders' equity 7,821,937 15,462,496 --------------------------------------------------------------------------- 21,390,244 44,505,395 ------------------------------------------------------------------------------------------------------------------------------------------------------ AirIQ Inc.

CONSOLIDATED STATEMENTS OF LOSS AND COMPREHENSIVE LOSS (in Canadian dollars except share information)

Three months ended Twelve months ended December December December December 31, 2007 31, 2006 31, 2007 31, 2006 ---------------------------------------------------------------------------Revenues $ 4,004,396 $ 10,188,842 $ 23,962,710 $ 40,455,897 Direct cost of sales 3,328,386 6,481,730 16,610,910 24,662,719 ---------------------------------------------------------------------------Gross profit 676,010 3,707,112 7,351,800 15,793,178 --------------------------------------------------------------------------- Expenses Sales and marketing 465,653 1,184,133 2,630,694 4,854,232 Engineering and research 694,902 838,561 3,104,747 3,454,389 General and administration 2,038,768 3,362,908 7,953,748 9,923,187 Stock-based compensation 47,167 90,000 304,107 397,500 Foreign exchange loss 387,850 (166,646) 2,241,036 113,360 --------------------------------------------------------------------------- 3,634,340 5,308,956 16,234,332 18,742,668 --------------------------------------------------------------------------- Loss before the following (2,958,330) (1,601,844) (8,882,532) (2,949,490) ---------------------------------------------------------------------------Interest expense, net 35,183 357,872 1,101,169 1,441,945 Restructuring charges 24,499 - 608,699 354,435 Amortization 381,699 794,027 1,338,182 2,861,918 Gain on sale of certain assets and liabilities (461,401) (113,750) (4,030,052) (113,750) --------------------------------------------------------------------------- (20,020) 1,038,149 (982,002) 4,544,548 ---------------------------------------------------------------------------Loss before income taxes (2,938,310) (2,639,993) (7,900,530) (7,494,038) Provision for income taxes 38,261 84,000 38,261 84,000 ---------------------------------------------------------------------------Net loss and comprehensive loss for the year (2,976,571) (2,723,993) (7,938,791) (7,578,038) ------------------------------------------------------------------------------------------------------------------------------------------------------ Loss and comprehensive loss per share - basic and diluted $ (0.02) $ (0.02) $ (0.05) $ (0.05) ------------------------------------------------------------------------------------------------------------------------------------------------------Weighted average number of common shares used in computing loss and comprehensive loss per share, basic and diluted 160,765,908 155,559,958 160,845,160 145,621,486 ------------------------------------------------------------------------------------------------------------------------------------------------------ AirIQ Inc.

CONSOLIDATED STATEMENTS OF CASH FLOWS (in Canadian dollars)

Three months ended Twelve months ended December December December December 31, 2007 31, 2006 31, 2007 31, 2006 ----------------------------------------------------------------------------OPERATING ACTIVITIES Net loss for the year $(2,976,571) $ (2,723,993) $ (7,938,791) $ (7,578,038) Add (deduct) items not involving cash Foreign exchange loss on restricted cash (14,701) - 247,279 - Stock-based compensation 47,167 90,000 304,107 397,500 Interest accreted on term loan (100,832) 48,104 117,480 281,497 Amortization of property, plant and equipment 551,161 407,314 1,395,689 2,010,805 Amortization of deferred service contract costs 1,262,417 3,832,500 6,564,063 15,283,377 Amortization of intangible assets 135,122 363,939 762,573 1,958,267 Amortization of deferred financing costs (33,821) 64,400 196,201 83,461 Gain on sale of certain assets and liabilities (461,403) (113,570) (4,030,052) (113,750) Changes in non-cash working capital balances related to operations Payment regarding dispute with component supplier - (728,375) - (728,375) Accounts receivable 221,350 534,698 199,341 (880,476) Inventory 154,337 (311,661) 708,191 3,325,116 Prepaid expenses 58,425 (66,768) 259,579 (30,295) Accounts payable and accrued liabilities 2,049,923 2,582,090 (2,036,899) 1,566,234 Income taxes payable 38,261 - 38,261 - Deferred revenue 434,722 (1,219,899) (1,478,081) (2,361,046) ---------------------------------------------------------------------------- Cash provided by (used in) operating activities 1,365,557 2,758,779 (4,691,059) 13,214,457 ---------------------------------------------------------------------------- INVESTING ACTIVITIES Proceeds from sale of certain assets - - 22,328,800 - Transfer of proceeds from sale of certain assets and liabilities transferred to restricted cash - - (2,193,740) - Earn-out payment - - - (4,942,750) Purchase of property, plant and equipment (331,653) (354,817) (827,805) (404,237) Proceeds from sale of trade name - 113,570 - 113,570 Deferred financing costs - - - (372,154) Deferred service contract costs (1,279,587) (1,859,256) (5,007,126) (13,299,578) ---------------------------------------------------------------------------- Cash provided by (used in) investing activities (1,611,240) (2,100,503) 14,300,129 (18,905,149) ---------------------------------------------------------------------------- FINANCING ACTIVITIES Repayment of obligations under capital lease (99,926) 125,413 (246,127) (51,953) Repayment of National Research Council loan (55,573) (35,333) (82,304) (35,333) Proceeds from short-term loan - - 1,250,000 - Repayment of short term loan - - (1,250,000) - Proceeds from term loan - - - 4,000,000 Repayments of term loan - - - (1,000,000) Proceeds from revolving operating loan - - - 5,000,000 Repayment of revolving operating loan - - (3,900,000) (1,100,000) Proceeds from secured debenture - - - 3,000,000 Repayment of secured debenture - - (3,000,000) - Repayment of bank financing - - - (6,985,968) Repayment of obligations for service contracts (59,080) (195,445) (547,336) (836,630) Repurchase of common shares and equity investments - - (5,875) - Share issuance costs - - - (699,867) Issuance of common shares and equity instruments - - - 5,309,091 ---------------------------------------------------------------------------- Cash provided by (used in) financing activities (214,579) (105,365) (7,781,642) 6,599,340 ---------------------------------------------------------------------------- Net decrease/ increase in cash during the year (460,262) 552,911 1,827,428 908,648

Cash, beginning of year 4,580,165 1,739,564 2,292,475 1,383,827 ----------------------------------------------------------------------------Cash, end of year $ 4,119,903 2,292,475 $ 4,119,903 2,292,475 -------------------------------------------------------------------------------------------------------------------------------------------------------- Supplementary cash flow information Cash interest $ 331,747 312,718 $ 855,611 836,031 Non-cash investing and financing transactions Property, plant and equipment purchased under capital leases 194,310 57,135 251,075 180,522

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Conference Call and Webcast

AirIQ will hold a conference call on Monday, March 31, 2008, at 3:00 p.m. ET. To access the call, please dial 416-695-9748 or 1-800-769-8320. A replay of the conference call will be available as of noon the same day until midnight April 7, 2008. To access the replay, dial 416-695-5800 or 1-800-408-3053 followed by the pass code 3255566. The call will also be webcast live on the Company's web site at www.airiq.com.

The Company's complete financial statements, including notes thereto, and the accompanying Management's Discussion and Analysis will be available at www.airiq.com and at Non-GAAP Disclosure

"EBITDA" is defined by the Company as net income before interest expense, income taxes, other charges, depreciation and amortization. The Company has included information concerning EBITDA because it believes that it may be used by certain investors as one measure of the Company's financial performance. EBITDA is not a measure of financial performance under Canadian GAAP and is not necessarily comparable to similarly titled measures used by other companies. EBITDA should not be construed as an alternative to net income or to cash flows from operating activities (as determined in accordance with Canadian GAAP) or as a measure of liquidity. In addition, the Company has included information concerning adjustments to gross profit, expenses and working capital because it believes that it may be used by certain investors as further measures of the Company's financial performance, and such adjustments to expenses or assets and liabilities are highlighted due to their nature or to their magnitude.

About AirIQ

AirIQ trades on the Toronto Stock Exchange under the symbol IQ. A leader in Wireless Location Services, specializing in Telematics and Security, AirIQ is headquartered in Pickering, near Toronto, Canada, with an office in San Diego, California, U.S.A. The Company operates as a wireless Internet applications service provider specializing in location-based services. AirIQ's services are offered to three primary markets: Commercial Fleets; Consumer; and Marine Fleets. AirIQ gives vehicle and vessel owners the abilities to manage and protect their mobile assets. AirIQ's services include: vehicle locating, boundary notification, automated inventory, maintenance reminders, security alerts, vehicle disabling, unauthorized movement alerts and many more features. 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 words such as "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 and results 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 new information, future events or otherwise.

Contacts: AirIQ Inc. Steve Willey Chief Executive Officer (416) 275-6994 Email: swilley@airiq.com Website: www.airiq.com

2008-03-28 22:24:25 0322543 MARKETWIRE