AirIQ Announces Second Quarter Results

Improved Working Capital Position and Expense to Revenue Ratio

Toronto, Ontario - August 11, 2006 – AirIQ Inc. (TSX: IQ), a leader in global wireless security, today announced its results for the second quarter and six months ended June 30, 2006.

Second Quarter Highlights

* Placed 17th in Profit 100, a ranking ofCanada’s fastest growing companies measuring the rate of revenue growth over the last five-year period
* Revenues increased to $10,217,687
* Expense to revenue ratio improved to 44% from 46.6% in the first quarter 2006
* EBITDA, excluding stock based compensation, and loss on foreign exchange was ($229,538), and ($9,538) excluding unusual second quarter legal expenses of $220,000
* Working capital position improved since March 31st by approximately $8,900,000

“AirIQ has grown dramatically for 5 years, and during the last 6 months we have paused to position the Company for its next growth phase”, said Donald E. Simmonds, President and CEO of AirIQ. “Part of this program has involved aggressive yet careful reductions in operating expenses, and we expect by the third quarter of 2006 to be operating with an annualized improvement of approximately $5 million from 2005 expense levels.”

“Several initiatives designed to improve the Company’s working capital position were successfully completed during the quarter,” elaborated Mark Kohler, Chief Financial Officer of AirIQ. “We refinanced our previous bank debt, and the final earn-out payment obligation for the purchase of the Aircept business was satisfied in full.”

The Company also adjusted product and service prices to reflect the higher value of its technology and service offerings.

Overview

The accompanying unaudited interim condensed consolidated statements of loss and deficit are presented for the three months and six months ended June 30, 2006 and June 30, 2005, comparatively, and include the operating results of AirIQ Inc. and its subsidiaries. The accompanying unaudited interim 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 June 30, 2006, including notes thereto and the accompanying Management’s Discussion and Analysis will be filed with the Canadian securities regulatory authorities by end of day August 14, 2006; 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 June 30, 2006, increased 1.4% to $10,217,687 from $10,077,283 for the three months ended June 30, 2005. The increase in revenues was 0.8% over the previous three months ended March 31, 2006.

The impact of the year over year fluctuation in the US dollar exchange rate against the Canadian dollar had a notional effect on the Company’s quarterly revenues of approximately $500,000 year over year, and approximately $140,000 quarter over quarter.

Revenues increased to $20,355,878 from $19,820,344 for the six months ended June 30, 2006 and 2005, respectively.

Gross Profit

Gross profit for the three months ended June 30, 2006 was $4,055,773, representing a decrease from gross profit of $4,249,021 for the same period in 2005. As a percentage of revenues, gross profit for the three months ended June 30, 2006, was 39.7% compared to 41.1% for the three months ended March 31, 2006.

The decrease in gross profit is due in part to the strengthening Canadian dollar against the US Dollar and also reflects costs expensed in the second quarter related to the final stages of transitioning the Company’s hardware technologies to the new digital and satellite platforms.

Gross profit decreased to $8,225,334 from $8,305,269 for the six months ended June 30, 2006 and 2005, respectively.

Expenses

Expenses totaled approximately $4.5 million for the three months ended June 30, 2006, a decrease of 13% compared to approximately $5.1 million for the comparable period in 2005. The year over year decrease in operating expenses is primarily due to integration activities during 2005 and 2006, and workforce reductions announced during the first quarter of 2006.

Included in expenses for the three months ended June 30, 2006 is approximately $220,000 of unusual legal expenses related primarily to the preparation and filing of the Company’s subsidiary, AirIQ US, defense and cross-complaint in connection with a previously disclosed claim made by a former component supplier.

Expenses as a percentage of revenues were further reduced to 44% for the three months ended June 30, 2006, compared with 46.6% for the three months ended March 31, 2006, and 50.9% for the three months ended June 30, 2005.

Expenses totaled $9,217,697 for the six months ended June 30, 2006, a $1,278,219 reduction compared to $10,495,916 for the six months ended June 30, 2005.

Other Charges

A total charge of $127,573 was recorded in the second quarter of 2006. This non-recurring charge relates primarily to payroll obligations attributed to staff reductions in the second quarter.

Net Interest

Net interest expense for the six months and three months ended June 30, 2006, was $761,336 and $535,264, respectively, compared to $857,385 and $578,666 for the six months and three months ended June 30, 2005.

Included in the net interest expense for the three months ended June 30, 2006 was the amount of $187,328 related to the fair market value of warrants issued in connection with the term loan and secured debenture financings during the quarter. Of this amount, $156,811 related to the early repayment of $1,000,000 of the term loan on June 20, 2006.

Net Loss per Share

Net loss for the second quarter was $1,869,319, or $0.01 per share, compared with $2,616,900 or $0.02 per share, for the second 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 June 30, 2006, the Company had cash and cash equivalents of approximately $2.9 million, and working capital of $378,332. 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.

During the second quarter ended June 30, 2006, the Company repaid its non-revolving credit facility in the total amount of $6,985,968, and paid in full the accrued earn-out payment obligation of US$4,250,000 related to the Aircept business acquired in 2004, with funds obtained from financing transactions during the second quarter that included a term loan, issuance of equity, revolving operating loan, and a secured debenture.

On April 5, 2006, the Company obtained a five-year $4,000,000 term loan from Lenbrook Corp., an existing shareholder of AirIQ, and Quadrature Investments Inc., a company controlled by Robert Simmonds, a director and existing shareholder of AirIQ (together, the “Lenders”). The term loan bears interest at a fixed 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.

In connection with the term loan financing and for no additional consideration, the Company issued a total of 5,000,000 share purchase warrants with an exercise price of $0.24 per share to the Lenders. The warrants are exercisable over a term of three years.

On June 20, 2006, the Company repaid a total of $1,000,000 to the Lenders with proceeds received from the secured debenture (see below).

On April 5, 2006, 26,545,455 special warrants were issued by the Company pursuant to a bought deal private placement financing at a price of $0.20 per special warrant for gross proceeds of $5,309,091 ($4,611,946 net of $697,145 of transaction costs). Each special warrant was qualified for distribution pursuant to a short form prospectus dated May 5, 2006, and was automatically exercised for no additional consideration into one common share of AirIQ on May 10, 2006.



On June 20, 2006, the Company obtained a $5,000,000 two year revolving operating loan from an unrelated private capital fund, replacing the non-revolving credit facility. The operating loan is secured by a general security agreement and first priority mortgage over all of the assets of the Company, and is subject to the Company maintaining certain financial covenants that include revenue and earnings (losses) before other expenses and income taxes and marginable consolidated accounts receivable balances. The funds drawn on the operating loan bear interest at the Canadian prime rate or U.S. base rates of interest plus 3%.



On June 20, 2006 the Company issued a $3,000,000 secured debenture to the unrelated private capital fund that holds the revolving operating loan described above. The debenture bears interest at the fixed rate of 12% per annum and will mature on June 20, 2008. The term is subject to extension if requested by AirIQ and if certain financial targets are met. Under the terms of the debenture, interest only is payable monthly and principal prepayments are allowed at the option of AirIQ after June 20, 2007.

In connection with the secured debenture financing and for no additional cost, the Company issued 3,750,000 special warrants to the holder of the debenture which are exercisable, for no additional consideration, into common share purchase warrants with an exercise price of $0.24 per share. The underlying warrants expire on June 20, 2009.

Primarily as a result of these financing transactions, the Company improved its working capital position during the quarter [excluding current deferred revenue and obligations for service contracts that are non-cash items] by $8,860,990.

Subsequent to the quarter end, on July 4, 2006, the Company reduced the outstanding balance on its operating loan by repaying $1,100,000 of the outstanding loan amount, as required by the consolidated accounts receivable margin test calculations under the loan. The maximum principal amount available under the revolving operating loan remains at $5,000,000, subject to the consolidated accounts receivable margin test.

Interim Consolidated Statements

Conference Call and Webcast

AirIQ will hold a conference call today, Friday, August 11, 2006, at 10 a.m. ET. To access the call, please dial 416-695-9753 or 1-800-766-6630. A replay of the conference call will be available as of noon the same day until midnight August 18, 2006. To access the replay, dial 416-695-5275 or 1-888-509-0081 followed by the pass code 627987. The call will also be webcast live on the Company’s web site at www.airiq.com.

The Company’s quarterly report, including complete financial statements and Management’s Discussion and Analysis will be available at www.airiq.com and at www.sedar.com by end of day August 14, 2006.

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 in Pickering, 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.

Contact Information

Mark Kohler

Chief Financial Officer

AirIQ Finance

Contact via E-mail