RNS Number:7988H
QuestAir Technologies Inc
26 January 2005
For Immediate Release 26 January, 2005
QuestAir Announces 2004 Results and
2005 Milestones
BURNABY, B.C. - QuestAir Technologies Inc. ("QuestAir" or "the Company"; AIM:
QAR; TSX: QAR) a developer and supplier of advanced gas purification systems for
refinery, industrial and fuel cell markets reported today its financial results
for the fiscal year ended September 30, 2004. All amounts are in Canadian
dollars unless otherwise noted.
2004 Highlights
* The signing of a five year Joint Development Agreement ("JDA") with
ExxonMobil Research and Engineering Company ("EMRE") to evaluate specific
projects to develop and commercialize large capacity hydrogen purification
systems for a range of refinery and petrochemical applications.
* Revenue growth of 62% to $3.0 million (2003: $1.8 million); and an
increase in the company's sales order backlog from $0.9 million to $3.9 million.
* A reduction in the cash used in operations and capital requirements to
$5.7 million (2003: $11.9 million).
* The signing of a non-exclusive Supply and Distribution Agreement ("SDA
") with Iwatani International Corporation ("Iwatani"), the largest vendor of
industrial hydrogen in Japan.
* Receipt of the Company's first multi-unit order for 10 hydrogen
purification systems from Plug Power Inc. (total value $0.9 million) for use in
Plug's GenSiteTM hydrogen generation systems.
* Receipt of a $1.0 million order from Iwatani for two hydrogen purifiers
for inclusion in the largest liquid hydrogen plant in Asia to be constructed in
Osaka, Japan.
* The installation of hydrogen purification systems at the Senju and Oume
hydrogen fueling demonstration projects, both located in Tokyo, Japan.
* The successful laboratory demonstration of a hydrogen recycle system to
increase the efficiency of molten carbonate fuel cell systems.
Jonathan Wilkinson, President and CEO of QuestAir, said:
"The key highlight of the year was the signing of the Joint Development
Agreement with EMRE, which provides QuestAir with significant new growth
opportunities in a range of large, existing markets in the global energy
industry."
"We also made significant progress with the growth of our revenues and order
backlog through the sale of commercial gas purification systems and engineering
service contracts. Other key accomplishments in the commercial area include the
expansion of our product distribution channels through the SDA with Iwatani, and
the significant orders from Plug Power and Iwatani."
For the year ended September 30, 2004, QuestAir recorded a net loss of $9.5
million ($1.94 per share), compared to a net loss of $16.1 million ($3.30 per
share) for the year ended September 30, 2003.
Following the end of the fiscal year, on December 21, 2004 the Company completed
an initial public offering ("IPO") of its securities on the AIM Market of the
London Stock Exchange Plc and the Toronto Stock Exchange, raising gross proceeds
of approximately $15.1 million through the sale of 8.6 million common shares.
Upon completion of the IPO, the Company had approximately $17.6 million in
combined cash and cash equivalents.
ExxonMobil Research and Engineering Company
Demand for hydrogen in oil refineries is expected to grow by up to 10% per year
through to 2010, driven by regulations requiring reduced levels of sulphur in
diesel fuel and the global increase in demand for petroleum products. The
initial product that QuestAir is developing with EMRE provides refineries with a
solution to this growth in hydrogen demand by recovering hydrogen from
hydrogen-containing waste streams within refineries.
QuestAir's gas purification technology is based on its proprietary innovations
in pressure swing adsorption ("PSA") technology that solve some of the inherent
disadvantages of conventional PSA. Conventional PSA technology was introduced
commercially in the 1960s and today is applied extensively in the production and
purification of hydrogen, oxygen and nitrogen for industrial uses. QuestAir's
fast-cycle PSA technology operates at significantly higher cycle speeds than
conventional PSA, resulting in a direct reduction in the size of equipment
required to purify a given volume of product gas.
The key features of the JDA with EMRE are as follows:
* The agreement provides a framework for a broad collaboration between
QuestAir and EMRE, and contemplates the development of multiple products
based on a common technology platform for use in the oil refining and
petrochemical industries.
* The first project being undertaken under the JDA is the assessment and
planned development of a large capacity hydrogen PSA for recovering hydrogen
in oil refineries. During 2004, QuestAir received two engineering service
contracts totaling $1.4 million to support product development work on this
project. The Company expects to test a prototype of this product in the
field at an oil refinery in the first half of 2006, with potential
commercial orders following later in 2006.
* QuestAir will work exclusively with EMRE on the development of PSA
products for refinery and petrochemical applications until 2007. Products
developed under the JDA will be available for sale to third parties, subject
to certain restrictions.
2005 Outlook and Milestones
Looking forward, highlights for the coming year include the receipt of an order
for a prototype large capacity PSA from EMRE, and the continued growth of the
Company's revenue from gas purification system sales and engineering service
contracts.
QuestAir's milestones for the fiscal year ending September 30, 2005 are:
1. Receive a purchase order for a prototype large capacity hydrogen PSA.
A key milestone in the first product development project being undertaken with
EMRE is the sale of a prototype large capacity hydrogen PSA for demonstration at
a refinery site.
2. Increase revenue by at least 100% over 2004 levels.
Revenues generated from the sale of gas purification systems and engineering
service contracts are anticipated to be at least $6 million in 2005.
3. Manage average cash used in operating activities and capital
requirements to under $8.5 million.
QuestAir's cash burn, excluding IPO offering costs, is expected to increase from
$5.7 million in 2004 to up to $8.5 million in 2005 as a result of increased
research and development activities, and increased capital expenditures related
to the joint development program with EMRE.
4. Sign an additional distribution agreement for QuestAir's first
generation gas purification products with a leading hydrogen plant vendor.
In fiscal 2004, QuestAir signed its first distribution agreement with Iwatani
covering the Asian market. The Company intends to leverage the resources and
infrastructure of additional distribution partners in order to accelerate the
penetration of its commercial PSA systems in specific market segments and
geographies.
5. Receive the first purchase order for a methane purification system for
landfill gas processing.
Elevated natural gas prices, and concerns over greenhouse gas emissions have
focused attention on renewable sources of methane fuel. Consequently, the
processing of landfill gas and other renewable 'biogas' to pipeline- or
LNG-grade methane has been identified as a key growth market for the Company.
6. Enter into an agreement to demonstrate use of QuestAir's technology for
hydrogen recovery from molten carbonate fuel cell systems.
QuestAir intends to develop products that recover purified hydrogen from the
exhaust of molten carbonate fuel cell ("MCFC") systems, for customers who wish
to produce hydrogen in addition to electrical power from the fuel cell. An
example would be a hydrogen 'energy station' where the MCFC system is used to
produce electrical power and hydrogen fuel for fuel cell vehicles.
2004 Financial Results
For the year ended September 30, 2004, QuestAir recorded a net loss of $9.5
million ($1.94 per share), compared to a net loss of $16.1 million ($3.30 per
share) for the year ended September 30, 2003. The decrease in the net loss in
2004 compared to 2003 was primarily the result of increased gross profit from
the sale of gas purification systems and engineering service contracts, reduced
net research and development expenditures, and a reduction in general and
administration expenses.
Operating Results
Revenues from the sale of gas purification systems and engineering service
contracts were $3.0 million for the year ended September 30, 2004, a 62%
increase from revenues of $1.9 million in 2003. Increased revenues from
engineering service contracts were the primary drivers of increased revenues in
2004. The following table provides a breakdown of our revenues for the reported
periods:
(Unaudited, $ '000) Years ended September 30
2004 2003
Gas purification systems 1,226 1,584
Engineering service contracts 1,776 264
Total revenue 3,002 1,848
Revenue from sales of gas purification systems decreased by 23% to $1.2 million
for the year ended September 30, 2004, from $1.6 million in 2003. This decrease
was primarily the result of a delay in the delivery and acceptance of a large
order for hydrogen purification systems. The remainder of the order was
subsequently accepted during the first quarter of fiscal 2005. Engineering
service contract revenues increased 573% to $1.8 million in 2004 from $0.3
million in 2003, primarily as a result of the completion of two engineering
services contracts for EMRE.
As a result of the Company's revenue recognition policy (see note 1 to the
financial statements included below), and the lengthy order-to-delivery cycle of
the Company's commercial gas purification systems (typically 16 weeks), we
believe that changes in the Company's sales order backlog are a useful indicator
of the strength of our commercial operations. QuestAir's backlog is defined as
future revenue from signed gas purification system sales and engineering service
contracts that have not yet been recognized by the Company. The following table
provides a breakdown of our sales order backlog for the reported periods:
(Unaudited, $ '000) Years ended September 30
2004 2003
Gas purification systems 2,812 860
Engineering service contracts 1,106 35
Total sales order backlog 3,918 895
Gross profit was $0.9 million for the year ended September 30, 2004, an increase
of 157% over the gross profit of $0.4 million for 2003. As a percentage of
total revenue, gross profit was 30% in 2004 compared with 19% in 2003. The
increase in gross margin was generally attributed to reduced manufacturing
costs, and a reduction in warranty costs. There were no warranty costs for the
period ended September 30, 2004.
Sales and marketing expenses were $1.7 million for the year ended September 30,
2004, an increase of 33% over sales and marketing expenses of $1.3 million in
2003. This increase was attributed to increased salary expenses and other costs
as the Company expanded its sales and marketing group in order to increase gas
purification system sales.
Gross research and development expenses decreased 30% to $6.3 million for the
year ended September 30, 2004 from $8.9 million in 2003. These expenses were
partially offset by government and joint development partner funding
contributions of $1.6 million and $2.0 million in 2004 and 2003 respectively,
resulting in net research and development costs of $4.7 million and $6.9 million
in 2004 and 2003 respectively. The decrease in net research and development
expenditures was due to a reduction in certain research and product development
activities focused on fuel cell related products. Government and development
partner funding contributions decreased as a result of reduced overall research
and development expenditures, since the Company's funding contributions from
Technology Partnerships Canada are calculated as a percentage of gross research
and development expenditures.
General and administrative expenses decreased 56% to $2.5 million for the year
ended September 30, 2004 from $5.6 million in 2003. This reduction was
generally related to a reduction in non-cash share based compensation and
termination costs in 2004.
Gross capital expenditures for the period ended September 30, 2004 totaled $0.6
million, compared to $1.3 million in 2003. This reduction in capital
expenditures was primarily a result of reduced research and development
activities during 2004.
Liquidity and Capital Resources
Cash used by operations and capital requirements for the year ended September
30, 2004 was $5.7 million, compared to $11.9 million in 2003. The decrease is
primarily due to a reduction in the level of research and development activities
described above, increased government and partner funding receipts, and an
increase in customer deposits for the sale of commercial gas purification
systems.
Cash Resources and Subsequent Equity Financing
Cash and short term investments at September 30, 2004 were $6.7 million,
compared to $12.4 million at the end of 2003. On December 21, 2004 the Company
completed an IPO of its securities concurrently on the AIM Market of the London
Stock Exchange Plc and the Toronto Stock Exchange, raising gross proceeds of
approximately $15.1 million through the sale of 8.6 million common shares at a
price of $1.75 per share. Upon completion of the IPO, the Company had
approximately $17.6 million in combined cash and cash equivalents.
In June 2003, the Company was awarded a $9.6 million conditionally repayable
loan from Technology Partnerships Canada, a funding program administered by
Industry Canada. As of September 30, 2004, the Company had claimed a total of
$3.9 million in funding against this loan.
As at December 31, 2004 QuestAir had 37,261,010 common shares issued and
outstanding. In addition, the Company had 4,731,927 options to purchase common
shares, and 622,308 warrants outstanding at that date.
Consolidated Balance Sheets
(expressed in Canadian dollars) As at As at
September 30 September 30
2004 2003
ASSETS
Current assets:
Cash and cash equivalents $6,691,923 $2,500,366
Short-term investments - 9,876,040
Accounts receivable - net of allowance for doubtful accounts of 425,628 964,450
$28,486 (2003 - $102,041)
Grants and funding receivables 687,692 2,437,352
Inventories 1,676,013 935,486
Prepaid expenses 90,283 119,503
9,571,539 16,833,197
Deferred charges 399,742 -
Note receivable - 150,000
Property, plant and equipment 2,592,286 3,410,352
$12,563,567 $20,393,549
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $774,139 $1,108,910
Accrued liabilities 1,007,373 933,550
Deferred revenue 1,980,439 585,301
Current portion of obligations under capital lease 114,810 -
3,876,761 2,627,761
Obligations under capital lease 120,776 -
3,997,537 2,627,761
Shareholders' Equity:
Share capital
Authorized
Unlimited common shares, voting, no par value
Unlimited preferred shares, Class A voting, convertible, no par
value
Unlimited preferred shares, Class B voting, convertible, no par
value
Unlimited preferred shares, Class C voting, convertible, no par
value
Common shares 2,795,830 2,741,693
Preferred shares 75,315,007 75,315,007
78,110,837 78,056,700
Contributed surplus 4,015,802 3,753,798
Deficit (73,560,609) (64,044,710)
8,566,030 17,765,788
$12,563,567 $20,393,549
Consolidated Statements of Operations and Deficit
(expressed in Canadian dollars) For the year ended For the three months ended
September 30, September 30,
2004 2003 2004 2003
Sales $3,001,955 $1,847,594 $746,711 $454,914
Cost of goods sold 2,097,264 1,494,944 592,857 379,405
Gross profit 904,691 352,650 153,854 75,509
Operating expenses
Amortization 1,810,710 2,428,301 362,396 580,729
Research and development - net 4,697,897 6,953,374 1,173,160 1,657,920
Sales and marketing 1,677,173 1,264,678 459,700 338,152
General and administration 2,479,387 5,630,301 480,631 740,366
10,665,167 16,276,654 2,475,877 3,317,167
Loss before undernoted (9,760,476) (15,924,004) (2,322,033) (3,241,658)
Other income (expense)
Interest income 190,834 514,717 29,399 150,837
Accretion of redeemable preferred - (708,152) - -
shares
Other 53,743 19,880 49,525 71,992
244,577 (173,555) 78,924 222,829
Loss for the period (9,515,899) (16,097,559) (2,243,109) (3,018,829)
Deficit - Beginning of period (64,044,710) (47,947,151) (71,317,500) (61,025,881)
Deficit - End of period $(73,560,609) $(64,044,710) $(73,560,609) $(64,044,710)
Basic and diluted loss per share $(1.94) $(3.30) $(0.46) $(0.62)
Weighted average number of common 4,915,287 4,874,154 4,922,992 4,884,526
shares outstanding
Consolidated Statements of Cash Flows
(expressed in Canadian dollars) For the year ended For the three months ended
September 30, September 30,
2004 2003 2004 2003
Cash flows from operating activities
Loss for the period $(9,515,899) $(16,097,559) $(2,243,109) $(3,018,829)
Items not involving cash
Amortization 1,810,710 2,428,301 362,396 580,729
Gain on sale of property, plant and (2,357) (2,406) (1,567) -
equipment
Non-cash compensation expense 300,661 2,378,010 39,802 24,182
recorded in contributed surplus
Accretion of redeemable preferred - 708,152 - -
shares
Foreign currency gain (12,772) - (12,772) -
(7,419,657) (10,585,502) (1,855,250) (2,413,918)
Changes in non-cash operating
working capital
Accounts, grants and funding 2,288,482 (2,892,433) 193,723 (842,059)
receivables
Inventories (740,527) 42,549 (279,393) (35,760)
Prepaid expenses 29,220 (3,812) 63,469 119,212
Accounts payable and accrued (614,156) 757,349 316,753 1,157,503
liabilities
Deferred revenue 1,395,138 (470,329) 1,003,123 (34,637)
Investment tax credits receivable - 2,100,000 - -
2,358,157 (466,676) 1,297,675 364,259
(5,061,500) (11,052,178) (557,575) (2,049,659)
Cash flows from investing activities
Decrease in short-term investments 9,876,040 - - -
Increase in short-term investments - (9,876,040) - -
Purchase of property, plant and (610,880) (1,315,993) (60,572) (292,384)
equipment
Decrease in note receivable 150,000 - - -
Proceeds on sale of property, plant 2,919 3,311 1,829 -
and equipment
9,418,079 (11,188,722) (58,743) (292,384)
Cash flows from financing activities
Issuance of Class C preferred shares - 11,000,000 - -
Share issue costs - (140,195) - -
Issuance of share purchase warrants - 500,000 - -
Issuance of common shares on 15,480 44,181 1 12,249
exercise of stock options
Repayment of obligations under (133,968) (163,094) - -
capital lease
Deferred charges (46,534) - (46,534) -
(165,022) 11,240,892 (46,533) 12,249
Increase (decrease) in cash and 4,191,557 (11,000,008) (662,851) (2,329,794)
equivalents
Cash and equivalents - Beginning of 2,500,366 13,500,374 7,354,774 4,830,160
period
Cash and equivalents - End of period $6,691,923 $2,500,366 $6,691,923 $2,500,366
Notes to the financial statements
1. Significant accounting policies
Basis of presentation
These consolidated financial statements have been prepared in accordance with
Canadian generally accepted accounting principles, which, except as disclosed in
note 2, do not materially differ from accounting principles generally accepted
in the United States. Further, the consolidated financial statements include the
accounts of the Company and its inactive wholly owned subsidiary, QuestAir
Technologies (USA) Inc.
Cash and cash equivalents
Cash and cash equivalents consist of cash on deposit and highly liquid
short-term interest bearing securities with maturities at the date of purchase
of three months or less.
Short-term investments
Short-term investments with maturities at the date of purchase of more than
three months, all of which are categorized as available for sale, are carried at
the lower of cost and market value.
Inventories
Inventories are recorded at the lower of cost and replacement cost for raw
materials and supplies and at the lower of cost and net realizable value for
work-in-progress and finished goods. Costs of raw materials are determined on an
average cost basis. Work-in-progress and finished goods include materials,
direct labour and production overhead. Inventories are recorded net of any
obsolescence provision.
Property, plant and equipment
Property, plant and equipment are recorded at cost (net of third party funding)
less accumulated amortization. Amortization is computed using the straight-line
method over their estimated useful lives at the following rates:
Test equipment 20%
Computer equipment 30%
Leasehold improvements lease term
Lab and warehouse equipment 20%
Manufacturing equipment 33%
Office equipment 20%
Furniture and fixtures 20%
Use of estimates
The preparation of financial statements in conformity with Canadian generally
accepted accounting principles requires management to make estimates and
assumptions, which affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the period.
Actual results could differ from these estimates.
Income taxes
The Company follows the asset and liability method of accounting for income
taxes. Under this method, future income taxes are recognized for the future
income tax consequences attributable to differences between the financial
statement carrying values and their respective income tax bases (temporary
differences) and for the benefit of loss carry-forwards. Future tax assets and
liabilities are measured using substantively enacted tax rates expected to apply
to taxable income in the years in which temporary differences are expected to be
recovered or settled. The effect on future income tax assets and liabilities of
a change in tax rates is included in income in the period that includes the
substantial enactment date. Future income tax assets are evaluated and if
realization is not considered to be more likely than not, a valuation allowance
is provided.
Research and development costs
Research costs are expensed as incurred. Development costs are expensed as
incurred unless they meet certain criteria under Canadian generally accepted
accounting principles for deferral and amortization, which relate primarily to
technological feasibility, identified future markets of the product, and
availability of resources to complete the project. The Company has determined
that none of its development costs to date have met these criteria.
Government assistance and investment tax credits
Government assistance is recorded when receipt is reasonably assured as either a
reduction of the cost of the applicable assets or a credit to the applicable
expenses incurred in the statement of operations as determined by the terms and
conditions of agreements under which the assistance is provided to the Company.
A liability is recorded when repayment of the assistance is considered probable.
Investment tax credits are recorded when receipt is reasonably assured as either
a reduction of the cost of the applicable assets or a credit to the expenses
incurred in the statement of operations depending on the nature of the
expenditures which gave rise to the credits.
Revenue recognition
The Company recognizes revenue on commercial equipment sales when title has
transferred, the customer has accepted the product, there is persuasive evidence
of an arrangement, collection is probable and the price is fixed or
determinable. Provisions are established for estimated product returns and
warranty costs at the time revenue is recognized. The Company records deferred
revenue when cash is received in advance of all of these revenue recognition
criteria being met.
Revenues from engineering service contracts are determined under the
percentage-of-completion method whereby revenues are recognized on a pro rata
basis in relation to contract costs incurred. Costs and estimated profit on
contracts in progress in excess of amounts billed are reflected as
work-in-progress. Cash received in advance of revenues being recognized on
contracts is classified as deferred revenue.
Warranty costs
The Company provides for future warranty costs on products sold based on
management's best estimates of such costs, taking into account past experience
and the nature of the contracts.
Stock-based compensation plans
The Canadian Institute of Chartered Accountants (CICA) Accounting Standards
Board has amended CICA Handbook Section 3870 - Stock-based Compensation and
Other Stock-based Payments - to require entities to account for employee stock
options using the fair value based method on or after January 1, 2004. Under the
fair value based method, compensation cost is measured at fair value at the date
of grant and is expensed over the award's vesting period. In accordance with the
transitional options permitted under amended Section 3870, the Company
prospectively applied the fair value based method to all employee stock options
granted on or after October 1, 2002. Under the prospective method of adoption
selected by the Company, stock-based employee compensation is recognized for all
employee options granted, modified or settled on or after October 1, 2002, using
the fair value based method. The resulting compensation expense is charged to
operations over the vesting period, except for awards to non-employees whereby
the compensation expense is recognized when the goods or services from the
non-employees are received.
For periods prior to October 1, 2002, the Company used the intrinsic value based
method for recognizing stock based compensation, except for awards issued to
non-employees, which were accounted for using the fair value based method.
Financial Instruments
a) Foreign exchange risk
Predominantly all of the Company's sales are in United States dollars. The
Company does not hold or issue financial instruments to manage its exposure to
currency rate fluctuations relating to sales. The value of United States dollar
denominated sales for the year ended September 30, 2004 was $3,001,590;
September 30, 2003 - $1,847,594.
2. United States generally accepted accounting principles
The Company follows generally accepted accounting principles in Canada (Canadian
GAAP), which are different in certain respects from those applicable in the
United States (U.S. GAAP). The significant differences between Canadian GAAP and
U.S. GAAP with respect to the Company's consolidated financial statements are
described below.
Consolidated Statements of Operations and Deficit
2004 2003
$ $
Loss for the year under Canadian GAAP 9,515,899 16,097,559
Accretion of redeemable preferred shares (a) 211,885 (708,152)
Loss for the year under U.S. GAAP 9,727,784 15,389,407
Deficit - Beginning of year under Canadian GAAP 64,044,710 47,947,151
Add: Accumulated accretion on redeemable preferred shares 5,176,776 5,031,011
calculated under U.S. GAAP (a)
Accumulated stock based compensation under U.S. GAAP 208,460 208,460
Deduct: Accumulated accretion of redeemable preferred shares (13,631,542) (12,923,390)
calculated under Canadian GAAP (a)
Deficit - Beginning of year under U.S. GAAP 55,798,404 40,263,232
Accretion of redeemable preferred shares for the year (a) - 145,765
55,798,404 40,408,997
Deficit - End of year under U.S. GAAP 65,526,188 55,798,404
Loss per share - U.S. GAAP 1.98 3.19
Consolidated Balance Sheet
2004 2003
Canadian U.S. Canadian U.S.
GAAP GAAP GAAP GAAP
$ $ $ $
Liabilities
Class C preferred shares (a) - 5,877,243 - 5,665,358
Shareholders' equity
Preferred shares (a) 75,315,007 56,000,436 75,315,007 56,000,436
Contributed surplus 4,015,802 9,418,709 3,753,798 9,156,705
Consolidated Statements of Cash Flows
2004 2003
$ $
Loss for the year under U.S. GAAP (9,727,784) (15,389,407)
Items not involving cash
Amortization 1,810,710 2,428,301
Gain on sale of property, plant and equipment (2,357) (2,406)
Non-cash compensation expense recorded in contributed surplus 300,661 2,378,010
Foreign currency gain (12,772) -
Accretion on preferred shares (a) 211,885 -
Changes in non-cash operating working capital 2,358,157 (466,676)
Cash flows from operating activities under U.S. and Canadian GAAP (5,061,500) (11,052,178)
a) Redeemable preferred shares
Prior to November 5, 2002, the Company's Class A and B redeemable preferred
shares were split into liability and equity components under Canadian GAAP.
Under U.S. GAAP, a value was assigned to the beneficial conversion feature
relating to the preferred shares with the balance presented as temporary equity
on the balance sheet. As the preferred shares were redeemable, the balance that
was presented as temporary equity was being accreted to the preferred share
redemption amount. As a result, under Canadian GAAP the Company recorded a
larger accretion charge each period compared to the accretion charge recorded
under U.S. GAAP. In addition, under Canadian GAAP the accretion charge was
recorded in the statement of operations, whereas for U.S. GAAP the accretion was
recorded as a charge to deficit and included in the loss per share calculation.
On November 5, 2002, the retraction provisions of the Class A and B preferred
shares were eliminated. As a result of these modifications, these preferred
shares were reclassified to equity for U.S. and Canadian GAAP purposes.
For the period from November 5, 2002 to July 1, 2003, the Class C preferred
shares were accounted for as equity. On July 1, 2003, the Company adopted the
provisions of Statement of Financial Accounting Standards No. 150 (SFAS 150),
which resulted in the Class C preferred shares being classified as a liability.
The liability for the Class C preferred shares was reflected at its fair value
of $5,665,358 and the resulting gain of $5,194,447 from the adoption of SFAS 150
has been recorded in shareholders' equity as contributed surplus.
At September 30, 2004, the liability has been recorded at its estimated fair
value of $5,877,243 (2003 - $5,665,358), with the increase of $211,885 being
recorded as an accretion charge in the consolidated statement of operations and
deficit.
a) Stock-based compensation
The Company adopted the fair value based method of accounting for stock-based
compensation, on a prospective basis, to account for all its awards of shares
and share options that are granted, modified or settled on or after October 1,
2002. The Company also adopted, on a prospective basis, the fair value based
method of accounting for stock-based compensation for U.S. GAAP purposes
effective October 1, 2002. Prior to October 1, 2002, the Company used the
intrinsic value based method to account for the above awards for both Canadian
and U.S. GAAP.
Had the Company adopted the fair value based method for the period prior to
October 1, 2002, the Company's net loss and loss per share under U.S. GAAP would
have been presented as follows:
2004 2003
$ $
Loss for the year 9,727,784 15,389,407
Additional compensation expense under fair 336,842 356,039
value based method
Loss for the year - pro forma 10,064,626 15,745,446
Loss per share - pro forma
Basic and diluted 2.05 3.26
In the calculation of the additional compensation expense above, the fair value
of each share option grant was estimated on the date of the grant using the
Black-Scholes option valuation model with the following assumptions:
Expected dividend yield 0%
Expected stock price volatility 0%
Risk-free interest rate 2.5%
Expected life of options 5 years
Certain statements in this press release may constitute ''forward-looking''
statements which involve known and unknown risks, uncertainties and other
factors which may cause the actual results, performance or achievements of the
Company, or industry results, to be materially different from any future
results, performance or achievements expressed or implied by such
forward-looking statements. When used in this press release, such statements use
such words as "anticipate", "believe", "plan", "estimate", "expect", "intend", '
'may'', ''will'' and other similar terminology. These statements reflect current
expectations regarding future events and operating performance and speak only as
of the date of this press release. Forward-looking statements involve
significant risks and uncertainties, should not be read as guarantees of future
performance or results, and will not necessarily be accurate indications of
whether or not such results will be achieved. A number of factors could cause
actual results to differ materially from the results discussed in the
forward-looking statements.
About QuestAir Technologies Inc.
QuestAir Technologies, Inc. is a developer and supplier of proprietary gas
purification systems for several large international markets, including existing
markets such as oil refining, biogas production and natural gas processing, and
emerging markets such as fuel cell power plants and fuel cell vehicle refuelling
stations. The Company has joint development agreements with Exxon Mobil Research
and Engineering Company and Shell Hydrogen, and a collaboration with FuelCell
Energy. QuestAir is based in Burnaby, British Columbia and its shares trade on
the AIM Market of the London Stock Exchange Plc. and on the Toronto Stock
Exchange under the symbol "QAR".
For further information please contact:
QuestAir Technologies Inc. Phone: (001) 604-453-6967
Andrew Hall Email: hall@questairinc.com
Director, Corporate Development and External Communications Web: www.questairinc.com
UK media contact:
Buchanan Communications Phone: 020 7466 5000
Charles Ryland, Ben Willey, Eleanor Williamson
Canadian media contact:
James Hoggan + Associates Phone: (001) 604-739-7500
John Kageorge
This information is provided by RNS
The company news service from the London Stock Exchange
END
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