AirIQ Announces Third Quarter 2008 Results
Continued Reduction in Expenses and Cash Used in Operations
- Press Release
- Source: AirIQ Inc.
- On 5:00 pm EST, Friday November 14, 2008
TORONTO, ONTARIO--(MARKET WIRE)--Nov 14, 2008 -- AirIQ Inc. (Toronto:IQ.TO - News), a leader in Wireless Location-Based Services, specializing in Telematics and Security, today announced its results for the three months and nine months ended September 30, 2008.
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"As a result of Management's focused effort to consolidate staff roles and improve efficiency of internal processes, AirIQ continues to deliver a decrease in expense levels and net use of cash", said Steve Willey, President and Chief Executive Officer of AirIQ Inc. "Our goal of realizing positive EBITDA and positive cash-flow remains paramount in our planning, despite the challenges of a weak economy."
Highlights:
- Total expenses decreased from both the second quarter 2008 and over the past four consecutive quarters;
- Net operating loss for the period and net use of cash decreased from both the second quarter 2008 and for the past four consecutive quarters;
- Quarterly use of cash continues to decrease;
- Selected by a national equipment rental Company for its fleet of mobile generators and heavy equipment;
- Increased market penetration in construction segment by 48% since the first quarter 2008; and
- Released new and updated marine vessel management hardware.
Subsequent to the end of the quarter, the Company announced that the formal review of strategic alternatives by the Special Committee of the Board had been concluded. Accordingly, Management will stay its course and maintain a focus on areas where expenses can be further reduced and productivity improved. At the same time, since consolidation of the telematics industry is regarded as essential for its maturing and growth, the Company will remain open to partnership or consolidation tactics.
Third Quarter Financial Highlights:
- Gross margins improved to 48.9% this quarter compared to last quarter's margin of 42.1% and 37.1% for the third quarter of 2007.
- Expenses were reduced to $2.2 million this quarter compared to $2.5 million in the last quarter and $4.2 million in the third quarter of 2007. The reduction in expenses when compared from this quarter to the same quarter the previous year is due to foreign exchange fluctuations, reduced expenses relating to personnel reductions and operating expenses.
- EBITDAS loss was approximately $693 thousand this quarter compared to $2.3 million for the third quarter of 2007.
- Net loss was reduced to approximately $1.1 million this quarter compared to the previous quarter loss of $1.5 million and of $3.4 million in the third quarter of 2007.
- Use of cash in operating activities was reduced to $276 thousand this quarter from $459 thousand in the prior quarter and $3.2 million in the third quarter of 2007. Net decrease in cash during the third quarter totaled $815 thousand as compared to $1.0 million in the prior quarter and $4.2 million in the third quarter of 2007.
Overview
The accompanying unaudited interim condensed consolidated statements of loss and deficit are presented for the three months and nine months ended September 30, 2008 and September 30, 2007, comparatively, and include the operating results of AirIQ Inc. and its subsidiaries. The Company's unaudited interim consolidated financial statements as at and for the period ended September 30, 2008, including notes thereto and the accompanying Management's Discussion and Analysis will be filed with the Canadian securities regulatory authorities by end of day November 14, 2008; 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 references to dollar amounts are in Canadian dollars.
Revenue
Revenues for the three months ended September 30, 2008 decreased 34.1% to $3,078,636, compared to $4,673,202 for the three months ended September 30, 2007; and decreased 50.6% to $9,861,641 for the nine months ended September 30, 2008 compared to $19,980,059 for the nine months ended September 30, 2007.
The decrease in revenues was primarily due to lower airtime revenues resulting from the reduction of the Company's analog subscriber base following the termination of the analog network in Canada and in the U.S. as well as reduced product sales to the purchaser of the certain assets and liabilities of the Company's subsidiary, AirIQ US, (hereinafter referred to as the "Sale of Certain Assets and Liabilities transaction") and the expiration of customer hardware contracts.
Gross Profit
Gross profit for the three months ended September 30, 2008 was $1,506,735 and $4,140,309, respectively, representing a decrease of 13.2% and 38.1%, respectively, compared to gross profit of $1,735,930 and $6,690,341, respectively, for the three months and nine months ended September 30, 2007.
The decrease in comparative year over year gross profit is primarily attributable to a reduction in the Company's analog subscriber base due to the termination of the analog networks in North America, and the transfer of certain customers and customer contracts pursuant to the Sale of Certain Assets and Liabilities transaction.
As a percentage of revenues, gross profit for the three months ended September 30, 2008, was 48.9%, compared to last quarter's 42.1% and 37.1% for the third quarter of 2007.
Expenses
Expenses totaled $2,244,280 and $7,194,242 respectively for the three and nine months ended September 30, 2008 compared to $4,197,409 and $12,614,127, respectively for the three months and nine months ended September 30, 2007.
Expenses reductions were primarily due to reductions in foreign exchange losses related to the strengthening of the Canadian dollar compared to the U.S. dollar, reductions in other areas primarily due to the reduction in personnel and other operating expenses, and the integration of the Company's operating segments following the Sale of Certain Assets and Liabilities transaction.
Employees totaled 50 at September 30, 2008 compared to 75 at September 30, 2007, and 123 as at December 31, 2006.
Included in third quarter 2008 expenses is an unusual bad debt reserve in the amount of approximately $271,000 recorded in conjunction with management's review of its entire customer base and estimated collectability of the related accounts.
Net Interest
Net interest expense and other financing charges for the three months and nine months ended September 30, 2008 totaled $132,318 and $373,966 respectively compared to $77,805 and $1,065,986 respectively for the three months and nine months ended September 30, 2007.
The increase in net interest expense for the three months ended September 30, 2008 compared to the three months ended September 30, 2007 is primarily due to lower interest income earned from investments. The decrease in net interest expense for the nine months ended September 30, 2008 compared to the same nine month period the previous year is primarily due to the repayment by the Company of both the secured debenture and revolving operating loans during the first quarter of 2007. As a result, the Company did not incur interest or financing charges in the second or third quarters of 2008 related to the secured debenture and revolving operating loans.
Net interest charges for the three months and nine months ended September 30, 2008 include cash payments of $94,132 and $282,395, respectively, related to the term loans (hereinafter discussed) and $9,572 and $33,129, respectively, related to interest on capital leases and service contracts. Total cash interest for the third quarter of 2008 was $103,654. In addition, net interest expense included $32,609 and $101,943 relating to the non-cash accreted interest on the term loans for the three and nine months ended September 30, 2008 respectively. The Company earned interest income of $3,995 and $43,501 for the three and nine months ended September 30, 2008, respectively, which was recorded as a reduction in net interest expense in the period.
Amortization
Amortization for the three months and nine months ended September 30, 2008 was $263,114 and $725,519, respectively, compared with $272,124 for the three months ended September 30, 2007, and $956,896 for the nine months ended September 30, 2008.
The decrease in period-over-period amortization was primarily due to the Sale of Certain Assets and Liabilities transaction related to property, plant and equipment and customer contracts.
Net Loss
Net loss for the three months and nine months ended September 30, 2008 was $1,132,977 and $4,153,418, respectively, or $0.01 and $0.03 per share, respectively, compared with a net loss of $3,395,608 and $4,962,220, respectively, or $0.02 and $0.03 per share, respectively, for the three months and nine months ended September 30, 2007.
Liquidity and Capital Resources
As at September 30, 2008, the Company had unrestricted cash and cash equivalents of $3,093,195 and positive working capital of $2,422,385. Working capital has been calculated by netting current assets and current liabilities, excluding restricted cash, and deferred revenue and obligations for service contracts that are non-cash items.
The Company has incurred significant losses, including $1,132,977 and $4,153,418 for the three months and nine months ended September 30, 2008, and has an accumulated deficit of $91,737,981 as at September 30, 2008.
The accompanying unaudited interim 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.
Notice to Reader: The following unaudited interim condensed consolidated
financial statements have been prepared by management
of AirIQ Inc. and have not been reviewed by the Company's
external auditors.
CONSOLIDATED BALANCE SHEETS
(in thousands of Canadian dollars)
(Going Concern Uncertainty)
Unaudited
As at September 30, 2008 December 31, 2007
$ $
---------------------------------------------------------------------
ASSETS
Current
Cash 3,093 4,120
Restricted cash - 1,946
Accounts receivable 1,890 5,490
Inventory 883 1,009
Prepaid expenses 676 164
---------------------------------------------------------------------
Total current assets 6,542 12,729
---------------------------------------------------------------------
Property, plant and equipment, net 1,332 1,805
Intangible assets, net 1,560 1,996
Goodwill 1,985 1,985
Deferred service contract costs, net 1,489 2,875
---------------------------------------------------------------------
12,908 21,390
---------------------------------------------------------------------
---------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current
Accounts payable and accrued liabilities 3,281 6,298
Income taxes payable 241 241
Deferred revenue 2,374 2,307
Obligations for service contracts 25 65
Obligations under capital lease 136 179
Current portion of term loan 462 462
---------------------------------------------------------------------
Total current liabilities 6,519 9,552
---------------------------------------------------------------------
Deferred revenue 328 1,599
Obligations for service contracts - 15
Obligations under capital lease 139 194
Term loan and secured debenture 2,118 2,208
---------------------------------------------------------------------
Total liabilities 9,104 13,568
---------------------------------------------------------------------
Shareholders' equity
Share capital 89,066 89,066
Other paid-in capital 4,448 4,448
Contributed surplus 2,028 1,893
Deficit (91,738) (87,585)
---------------------------------------------------------------------
Total shareholders' equity 3,804 7,822
---------------------------------------------------------------------
12,908 21,390
---------------------------------------------------------------------
---------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF LOSS AND COMPREHENSIVE
LOSS
(in thousands of Canadian dollars except per share information)
Unaudited
Three months ended September 30, 2008 September 30, 2007
$ $
--------------------------------------------------------------------------
Revenues 3,079 4,673
Direct cost of sales 1,572 2,937
--------------------------------------------------------------------------
Gross profit 1,507 1,736
--------------------------------------------------------------------------
Expenses
Sales and marketing 427 576
Engineering and research 459 788
General and administration 1,451 2,098
Stock-based compensation 45 138
Foreign exchange (gain) loss (138) 598
--------------------------------------------------------------------------
2,244 4,198
--------------------------------------------------------------------------
Loss before the following (737) (2,461)
--------------------------------------------------------------------------
Interest expense, net 133 78
Other charges - 584
Depreciation and amortization 263 272
--------------------------------------------------------------------------
396 934
--------------------------------------------------------------------------
Loss before income taxes (1,133) (3,396)
--------------------------------------------------------------------------
Net loss and comprehensive
loss for the period (1,133) (3,396)
--------------------------------------------------------------------------
--------------------------------------------------------------------------
Loss and comprehensive loss per share
- basic and diluted $(0.01) $(0.02)
--------------------------------------------------------------------------
--------------------------------------------------------------------------
Weighted average number of common
shares used in computing loss and
comprehensive loss per share,
basic and diluted 160,813,408 160,845,930
--------------------------------------------------------------------------
--------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF LOSS AND COMPREHENSIVE
LOSS
(in thousands of Canadian dollars except per share information)
Unaudited
Nine months ended September 30, 2008 September 30, 2007
$ $
--------------------------------------------------------------------------
Revenues 9,862 19,980
Direct cost of sales 5,722 13,290
--------------------------------------------------------------------------
Gross profit 4,140 6,690
--------------------------------------------------------------------------
Expenses
Sales and marketing 1,286 2,165
Engineering and research 1,640 2,410
General and administration 4,406 5,929
Stock-based compensation 135 257
Foreign exchange (gain) loss (273) 1,853
--------------------------------------------------------------------------
7,194 12,614
--------------------------------------------------------------------------
Loss before the following (3,054) (5,924)
--------------------------------------------------------------------------
Interest expense, net 374 1,066
Other charges - 584
Depreciation and amortization 725 957
Gain on sale of certain
assets and liabilities - (3,569)
--------------------------------------------------------------------------
1,099 (962)
--------------------------------------------------------------------------
Loss before income taxes (4,153) (4,962)
--------------------------------------------------------------------------
Net loss and comprehensive loss for
the period (4,153) (4,962)
--------------------------------------------------------------------------
--------------------------------------------------------------------------
Loss and comprehensive loss per share
- basic and diluted $(0.03) $(0.03)
--------------------------------------------------------------------------
--------------------------------------------------------------------------
Weighted average number of common
shares used in computing loss and
comprehensive loss per share,
basic and diluted 160,813,408 160,855,860
--------------------------------------------------------------------------
--------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands of Canadian dollars)
Unaudited
Three months ended September September
30, 2008 30, 2007
$ $
----------------------------------------------------------------------
OPERATING ACTIVITIES
Net loss for the period (1,133) (3,396)
Add (deduct) items not involving cash
Foreign exchange loss on restricted cash - 113
Stock-based compensation 45 137
Interest accreted on term loan 38 24
Amortization of property, plant and equipment 154 194
Amortization of deferred service contract costs 765 938
Amortization of intangible assets 149 143
Amortization of deferred financing costs - 4
Gain on sale of certain assets and liabilities - -
Changes in non-cash working capital
balances related to operations
Accounts receivable 360 (916)
Inventory 39 486
Prepaid expenses (279) (4)
Accounts payable and accrued liabilities 102 (368)
Deferred revenue (516) (561)
----------------------------------------------------------------------
Cash provided by (used in) operating activities (276) (3,206)
----------------------------------------------------------------------
INVESTING ACTIVITIES
Purchase of property, plant and equipment (31) (123)
Deferred service contract costs (273) (646)
----------------------------------------------------------------------
Cash provided by (used in) investing activities (304) (769)
----------------------------------------------------------------------
FINANCING ACTIVITIES
Repayment of obligations under capital lease (14) (59)
Repayment of term loan (210) -
Repayment of obligations for service contracts (11) (154)
Repurchase of common shares - (6)
----------------------------------------------------------------------
Cash provided by (used in) financing activities (235) (219)
----------------------------------------------------------------------
Net increase (decrease) in cash during the period (815) (4,194)
Cash, beginning of period 3,908 8,774
----------------------------------------------------------------------
Cash, end of period 3,093 4,580
----------------------------------------------------------------------
----------------------------------------------------------------------
Supplementary cash flow information
Cash interest 104 95
Non-cash investing and financing transactions
Property, plant and equipment purchased under
capital leases 9 26
----------------------------------------------------------------------
----------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands of Canadian dollars)
Unaudited
Nine months ended September September
30, 2008 30, 2007
$ $
-----------------------------------------------------------------------
OPERATING ACTIVITIES
Net loss for the period (4,153) (4,962)
Add (deduct) items not involving cash
Foreign exchange loss on restricted cash - 262
Stock-based compensation 135 257
Interest accreted on term loan 119 218
Amortization of property, plant and equipment 577 845
Amortization of deferred service contract costs 2,825 5,302
Amortization of intangible assets 436 6287
Amortization of deferred financing costs - 230
Gain on sale of certain assets and liabilities - (3,569)
Changes in non-cash working capital
balances related to operations
Accounts receivable 3,598 (22)
Inventory 126 554
Prepaid expenses (512) 201
Accounts payable and accrued liabilities (3,017) (4,087)
Deferred revenue (1,203) (1,913)
-----------------------------------------------------------------------
Cash provided by (used in) operating activities (1,069) (6,056)
-----------------------------------------------------------------------
INVESTING ACTIVITIES
Purchase of property, plant and equipment (104) (496)
Deferred service contract costs (1,438) (3,728)
-----------------------------------------------------------------------
Cash provided by (used in) investing activities (1,542) (4,224)
-----------------------------------------------------------------------
FINANCING ACTIVITIES
Proceeds from sale of certain assets - 22,329
Transfer of proceeds to (from) sale of
certain assets and liabilities
transferred to restricted cash 1,946 (2,194)
Repayment of obligations under capital lease (98) (146)
Repayment of term loan (210) -
Repayment of National Research Council loan - (27)
Proceeds from short-term loan - 1,250
Repayment of short-term loan - (1,250)
Repayment of revolving operating loan - (3,900)
Repayment of secured debenture - (3,000)
Repayment of obligations for service contracts (54) (488)
Repurchase of common shares - (6)
-----------------------------------------------------------------------
Cash provided by (used in) financing activities 1,584 12,568
-----------------------------------------------------------------------
Net increase (decrease) in cash during the period (1,027) 2,288
Cash, beginning of period 4,120 2,292
-----------------------------------------------------------------------
Cash, end of period 3,093 4,580
-----------------------------------------------------------------------
-----------------------------------------------------------------------
Supplementary cash flow information
Cash interest 316 524
Non-cash investing and financing transactions
Property, plant and equipment purchased under
capital leases 29 57
-----------------------------------------------------------------------
-----------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS'
EQUITY
(in thousands of Canadian dollars except per share information)
Unaudited
Nine month period ended September 30, 2008
---------------------------------------------------------------------------
Other
paid-in Contributed
Share capital capital surplus Deficit Total
# $ $ $ $ $
---------------------------------------------------------------------------
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Balance,
December
31, 2007 160,813,408 89,066 4,448 1,893 (87,585) 7,822
---------------------------------------------------------------------------
Stock-based
compensation - - - 135 - 135
Net loss for
the period - - - - (4,153) (4,153)
---------------------------------------------------------------------------
Balance,
September
30, 2008 160,813,408 89,066 4,448 2,028 (91,738) 3,804
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Nine month period ended September 30, 2007
---------------------------------------------------------------------------
Other
paid-in Contributed
Share capital capital surplus Deficit Total
# $ $ $ $ $
---------------------------------------------------------------------------
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Balance,
December
31, 2006 160,860,908 89,072 4,448 1,588 (79,646) 15,462
---------------------------------------------------------------------------
Purchased
under
Normal
Course
Issuer Bid (47,500) (6) - - - (6)
---------------------------------------------------------------------------
Stock-based
compensation - - - 257 - 257
Net loss for
the period - - - - (4,962) (4,962)
---------------------------------------------------------------------------
Balance,
September
30, 2007 160,813,408 89,066 4,448 1,845 (84,608) 10,751
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---------------------------------------------------------------------------No Conference Call
AirIQ will not be holding a conference call to discuss results as has been their custom in the past. The Company's quarterly 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 November 14, 2008.
Non-GAAP Disclosure
"EBITDAS" is defined by the Company as net income before interest expense, income taxes, other charges, depreciation, amortization and stock-based compensation. The Company has included information concerning EBITDAS because it believes that it may be used by certain investors as one measure of the Company's financial performance. EBITDAS is not a measure of financial performance under Canadian GAAP and is not necessarily comparable to similarly titled measures used by other companies. EBITDAS 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.
The accompanying unaudited condensed interim consolidated statements of net loss and deficit are presented for the three months and nine months ended September 30, 2008 and 2007, comparatively, and include the operating results of AirIQ Inc. and its subsidiaries.
Unless otherwise noted herein, all references to dollar amounts are to Canadian dollars.
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 has offices in Pickering, Ontario, Canada, and in San Diego, California, United States. The Company offers a suite of location based services (LBS) under a 'software as a service' (SaaS) model that results in recurring revenues for each device deployed. AirIQ offers service to three primary markets: Commercial Fleets; dealers that service Consumer segments; and Marine Fleets (fisheries and workboat). AirIQ gives vehicle and vessel owners the ability to monitor, manage and protect their mobile assets. Services include: instant vehicle locating, boundary notification, automated inventory reports, maintenance reminders, security alerts, 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 words such as "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 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.
Contact:
Contacts:
AirIQ Inc.
Steve Willey
Chief Executive Officer
(416) 275-6994
Email: swilley@airiq.com
Website: http://www.airiq.com
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