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AirIQ Announces First Quarter Results


WEBWIRE

Record unit shipments; significant improvement in profitability metrics

Toronto, Ontario May 12, 2006 – AirIQ Inc. (TSX: IQ), a leader in global wireless security, today announced its results for the first quarter ended March 31, 2006.

First Quarter Highlights
• Shipments of 30,174 units were made in the quarter, a record for the Company
• Net active subscriber base grew to 222,934 units
• Revenues of $10,138,191
• Expense to revenue ratio improved to 46.6% (reflecting decreased expenses from cost reduction measures)
• Loss before other expenses and taxes (excluding stock based compensation and foreign exchange loss) of $295,105 compared to $4,736,339 in the fourth quarter of 2005
• Working capital position improved as a result of $9.3 million of financings finalized subsequent to the end of the quarter

As a recurring revenue business, the key measures of AirIQ’s progress relate to various trajectories, or trends. The Company’s strategy is to aggressively acquire new subscribers and service revenues from a relatively fixed and scalable infrastructure.

“During the first quarter we achieved record unit shipments and strong organic subscriber growth,” said Donald Simmonds, President and CEO of AirIQ. “This positive operational momentum with reducing expenses due to our integration progress led to improved results across key financial metrics”.

“Subsequent to the end of the quarter, the Company also completed two financings totaling $9.3 million,” said Mark Kohler, Chief Financial Officer, “which enabled us to satisfy in full the earn-out payment obligation to the vendor of the Aircept business purchased in 2004. These financings improved our working capital position by replacing current obligations with long-term debt.”

Overview
The accompanying unaudited condensed consolidated statements of loss and deficit are presented for the quarters ended March 31, 2006 and March 31, 2005, comparatively, and include the operating results of AirIQ Inc. and its subsidiaries. The accompanying unaudited condensed consolidated balance sheets 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. The Company’s unaudited interim consolidated financial statements as at and for the period ended March 31, 2006, including notes thereto and the accompanying Management’s Discussion and Analysis will be filed with the Canadian securities regulatory authorities today; 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 Increased
Revenues for the three months ended March 31, 2006, increased 4.1% to $10,138,191 from $9,743,061 for the three months ended March 31, 2005. The increase in revenues resulted from continuing net additions to the Company’s subscriber base. The increase in revenues was 1.8% over the previous three months ended December 31, 2005. Included in the Company’s reported revenues during the three months ended March 31, 2006 is approximately $250,000, primarily from product only sales which are in addition to the Company’s contracted service revenue arrangements with its customers. During the comparative period in 2005, the Company recorded approximately $355,000 from product only sales.

Gross Profit
Gross profit for the three months ended March 31, 2006 was $4.2 million, an increase of 2.8% compared to the same period in 2005. As a percentage of revenues, gross profit for the three months ended March 31, 2006, was 41.1% compared to 41.6% for the three months ended March 31, 2005 and 42.1% for the three months ended December 31, 2005.

Expenses
Expenses totaled $4.7 million for the three months ended March 31, 2006, a decrease of 12.9% compared to $5.4 million for the comparable period in 2005. The year over year decrease in operating expenses is primarily due to integration activities during 2005 and workforce reductions announced during the first quarter of 2006. Expenses as a percentage of revenues improved to 46.6% for the three months ended March 31, 2006, compared with 55.1% for the three months ended March 31, 2005, reflecting the operating leverage in the Company’s growing recurring revenue business.

EBITDA Improvement
EBITDA loss was $553,393 for the first quarter, compared to an EBITDA loss of $1,308,425 in the comparable quarter in 2005. EBITDA loss excluding non-cash related expenses of stock-based compensation and loss on foreign exchange was $295,105 in the first quarter 2006 compared to $4,736,339 in the fourth quarter 2005, and $1,115,990 in the first quarter 2005.

Other Charges
A total charge of $226,862 was recorded in the first quarter of 2006. This non-recurring charge relates primarily to payroll obligations attributed to staff reductions announced in the first quarter.

Net Loss per Share
Net loss for the first quarter was $1.7 million, or $0.01 per share, compared with $2.9 million or $0.02 per share, for the first quarter of 2005. The improvement relates primarily to the implementation of the Company’s integration strategy and the resulting reductions to expenses.

Liquidity and Capital Resources
As at March 31, 2006, the Company had cash and cash equivalents of $1.9 million, an increase of $484,439 over the cash balance as at December 31, 2005, and negative working capital of $8.5 million. Working capital has been calculated by netting current assets and current liabilities, excluding deferred revenue and obligations for service contracts that are non-cash items.

Subsequent Events
Special Warrant Issue
On April 5, 2006, the Company issued 26,545,455 special warrants of AirIQ at a price of $0.20 per special warrant for gross proceeds of $5,309,091. Each special warrant was automatically exercised for no additional consideration into one common share of AirIQ on May 10, 2006. The net proceeds of $4,937,455, together with additional general corporate funds, were used to satisfy in full the Company’s earn-out obligation in connection with the purchase of the Aircept business in 2004.

Term Loan
On April 5, 2006, the Company obtained a five-year $4,000,000 term loan from certain existing shareholders, including Lenbrook Corp. and Quadrature Investments Inc., a company controlled by Robert Simmonds, a director of AirIQ (together, the “Lenders”). The term loan bears interest at the rate of 12% per annum payable quarterly; interest only is payable for the first two years, and quarterly blended payments of principal plus interest will be payable for the subsequent twelve quarters. Proceeds from the term loan were used to reduce the balance under the Company’s credit facility to $3.0 million. In connection with the term loan, the Company issued an aggregate of 5,000,000 warrants to purchase common shares at an exercise price of $0.24 per share to the Lenders. The warrants are exercisable over a term of three years.

Credit Facility
On April 5, 2006, the Company’s credit facility was amended to, among other things, reduce the commitment under the facility from $7.25 million to $3.0 million and to extend the final due date for the repayment of the credit facility from April 25, 2006 to March 31, 2007.

Interim Consolidated Statements: www.airiq.com/airiqnewweb2/uploads/documents/Q1_financials_2006.pdf

Conference Call and Webcast
AirIQ will hold a conference call on Friday, May 12, 2006, at 10 a.m. ET. To access the call please dial 1-800-240-2134. A replay of the conference call will be available at noon the same day until midnight May 19, 2006. To access the replay, dial 416-640-1917 or 1-877- 289-8525 followed by the passcode 21188282#. The call will also be webcast live on the Company’s website at www.airiq.com.

The Company’s quarterly report, including complete financial statements and Management’s Discussion and Analysis will be available onMay 15, 2006 at www.airiq.com and at www.sedar.com.

Non-GAAP Disclosure
EBITDA is defined by the Company as operating 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 operating income or to cash flows from operating activities (as determined in accordance with Canadian GAAP) as a measure of liquidity.

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. 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. 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.

About AirIQ
AirIQ trades on the Toronto Stock Exchange under the symbol IQ. A leader in Global Wireless Security, AirIQ is headquartered inPickering, near Toronto, Canada, with offices in Lake Forest and 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 four primary markets: Commercial Fleets; Consumer; Vehicle Finance; 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.



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