RNS Number:3272N
QuestAir Technologies Inc
06 December 2006
Immediate Release 6 December 2006
QuestAir Technologies announces 2006 Results and
2007 Milestones
BURNABY, B.C. - QuestAir Technologies Inc. ("QuestAir" or "the Company"; AIM:
QAR; TSX: QAR) reports its financial and operational results for the fiscal year
ended September 30, 2006 ("fiscal 2006"). All amounts are in Canadian dollars
unless otherwise noted.
2006 Highlights
* Revenue growth of 20% to $7.6 million (2005: $6.3 million), in line with
the Company's revenue guidance of $7.5 million for the fiscal year.
QuestAir's sales order backlog at year end was $5.0 million, increased by
67% from $3.0 million at September 30, 2005.
* Cash used in operations and capital expenditures of $9.4 million (2005:
$8.7 million), in line with the Company's cash burn guidance of under
$8.5-9.5 million for the fiscal year.
* Net loss of $10.3 million ($0.24 per share), compared to $9.5 million
($0.31 per share) for fiscal 2005.
* Two key milestones achieved in the program with ExxonMobil Research and
Engineering Company ("EMRE") to develop the H-6200 hydrogen purifier for
refinery and petrochemical applications.
o The program successfully passed a critical ExxonMobil review,
authorizing final funding for the construction of a prototype H-6200 to
be demonstrated at an ExxonMobil refinery in 2007.
o QuestAir also signed a marketing agreement with EMRE which outlines each
party's responsibilities for the joint marketing of the H-6200 to third
party customers in the oil refining market.
* First sale of a M-3100 methane purification system in the biogas market,
to GSF Energy LLC to recover pipeline-grade methane from landfill gas at the
Rumpke Sanitary Landfill in Cincinnati, Ohio.
* Expansion of the distribution channels for QuestAir's commercial gas
purification products, including the signing of a licensing agreement with
Hydro-Chem, a leading hydrogen plant vendor; as well as a supply agreement
signed with Nuvera Fuel Cells.
* Successful completion of an equity offering, raising net proceeds of
approximately $18.4 million.
Jonathan Wilkinson, President and CEO of QuestAir, said:
"We are very pleased with the progress made during fiscal 2006 towards
achievement of our operational milestones and financial guidance. We grew both
our revenue and our backlog of signed customer contracts, and made significant
progress towards the commercialization of our H-6200 hydrogen purifier with
ExxonMobil. We are planning to demonstrate a commercial-scale H-6200 system at
an ExxonMobil refinery in Europe in 2007, and we have begun to aggressively
market the product to oil refinery customers under a marketing agreement signed
with ExxonMobil earlier this year."
"In the commercial area, we successfully expanded the markets for our first
generation gas purification products, most notably with our first sale of a
M-3100 methane recovery system in the growing biogas market. We also expanded
the distribution channels for our commercial products through the licensing and
supply agreements signed with Hydro-Chem and Nuvera Fuel Cells respectively."
Operating Review & 2006 Milestone Update
A number of key achievements were made in the program being undertaken with EMRE
to develop the H-6200 hydrogen purifier for refinery and petrochemical
applications. In April 2006 the program passed a critical internal ExxonMobil
review, authorizing final funding to complete the construction and testing of a
prototype H-6200 hydrogen purifier at an ExxonMobil refinery located in Europe.
During fiscal 2006, QuestAir received purchase orders from ExxonMobil totaling
$4.3 million related to the prototype construction. A key purchase order was
received in the fourth quarter of fiscal 2006, which extended the construction
of the prototype plant into the fourth quarter of calendar 2006 (see 'Subsequent
Events').
QuestAir also signed a marketing agreement with EMRE which covers the marketing
of the H-6200 hydrogen purifier to third party customers in the oil refining
industry. The agreement outlines the roles that each party will play in the
marketing process, and how the commercial gains from the sales of the product
will be shared between QuestAir and EMRE. Following the signing of this
agreement, QuestAir and EMRE began jointly marketing and promoting the H-6200,
and currently the parties are responding to a number of commercial enquiries
from both ExxonMobil and third party refineries.
During the year, QuestAir also completed an initial research contract with EMRE
to assess the use of the H-6200 platform technology for the processing of
contaminated or "sour" natural gas. This contract was significant in
demonstrating the potential application of the product platform to other
high-value markets outside of oil refining. Options for the next phase of this
development work are currently being assessed.
A number of breakthroughs were also made during the year in the sale of
QuestAir's commercial first generation gas purification products. During the
year, QuestAir sold its first M-3100 methane recovery system, valued at
approximately US$2 million, into the landfill gas processing market. The M-3100
system will recover pipeline-grade methane from landfill gas generated at the
Rumpke Sanitary Landfill near Cincinnati, Ohio. This initial sale into the
landfill gas market follows a successful demonstration of a M-3100 system at the
Vancouver Landfill site which was undertaken during the year.
In the industrial hydrogen market, the Company successfully started up two
H-3100 hydrogen purifiers installed at the HydroEdge liquid hydrogen plant in
Osaka, Japan. These are the largest capacity commercial hydrogen purifiers that
QuestAir has operated to date, demonstrating the expansion of QuestAir's
commercial product line into the intermediate capacity range of the hydrogen
plant market.
QuestAir also made significant progress in expanding its distribution channels
for its first generation products. The Company signed a manufacturing licensing
agreement with Hydro-Chem LLC (a division of The Linde Group), a leading
manufacturer of hydrogen plants in the intermediate capacity range. Under the
terms of the agreement, QuestAir's H-3100 hydrogen purifier will be included in
Hydro-Chem's industrial hydrogen plants, expanding QuestAir's access to the
intermediate capacity segment of the hydrogen plant market.
During the year, QuestAir maintained its position as the leading supplier of
hydrogen purification systems in the emerging hydrogen infrastructure market.
The Company received orders for five H-3200 hydrogen purifiers for hydrogen
fueling stations located in Canada, the United States and Korea. At year-end,
the Company had sold 14 hydrogen purifiers into the hydrogen infrastructure
market. The Company also signed an agreement, valued at up to US$700,000 over 2
years, to supply its small capacity H-3300 hydrogen purifiers to Nuvera Fuel
Cells. The H-3300 will be incorporated into Nuvera's PowerTapTM hydrogen
generators, which will be marketed as a distributed source of hydrogen fuel to
support fuel cell powered vehicles such as fork lifts and airport ground support
vehicles.
The Company also received a $1.4 million engineering services contract from EMRE
to complete the second phase of a program to develop a compact on-board hydrogen
generator for use in a range of transportation applications. Target markets for
this product include potential early term fuel cell markets such as utility
vehicles and auxiliary power units for heavy duty trucks and military vehicles.
In summary, progress made towards the achievement of QuestAir's 2006 milestones
was as follows:
Milestone Progress
---------------------- -------------------------
1. Pass final ExxonMobil The ExxonMobil program review was successfully
program review and receive passed in April 2006, authorizing final funding
purchase orders for prototype for the prototype construction and testing.
large capacity hydrogen PSA. QuestAir received purchase orders totaling $4.3
million during fiscal 2006 towards the prototype
plant construction.
2. Complete fabrication and The final purchase order for the prototype
shipment of the large capacity H-6200 was received in the fourth quarter of
hydrogen PSA to ExxonMobil fiscal 2006, extending the completion of the
refinery. prototype fabrication to around the end of
calendar 2006, with shipment to follow shortly
thereafter.
3. Sign agreement with EMRE In May 2006 we signed an agreement with EMRE to
for marketing of large capacity jointly market the H-6200 hydrogen purifier to
hydrogen PSA in the oil third party customers in the oil refining
refining industry. market.
4. Sign agreement to extend During fiscal 2006 we completed an initial
large capacity PSA product contract with EMRE to assess the use of the
platform into new market. H-6200 technology platform of the processing of
sub-quality or "sour" natural gas. Options for
further funded work in this area, or in other
petrochemical markets are currently being
assessed, with a formal agreement expected to
follow in fiscal 2007.
5. Sign an additional In March 2006 we signed a licensing agreement
distribution agreement for with Hydro-Chem, a leading global supplier of
QuestAir's first generation gas industrial hydrogen plants. QuestAir's H-3100
purification products with a hydrogen purifier will be included as a standard
leading hydrogen plant vendor. offer in Hydro-Chem's product line.
---------------------- -------------------------
Subsequent Events
Subsequent to the end of fiscal 2006, there were a number of developments in the
refinery program with EMRE. In October 2006, the Company renewed its Joint
Development Agreement ("JDA") with EMRE, extending the exclusivity period of the
research collaboration in the refinery and petrochemical market with EMRE for a
further 3 years. The extension of the JDA is intended to allow QuestAir to
complete additional product development work with EMRE to extend the H-6200
product platform into additional markets in the oil refining and petrochemical
markets.
During the first quarter of fiscal 2007, the Company experienced further delays
in the fabrication of the prototype H-6200 hydrogen purifier to be demonstrated
at the ExxonMobil refinery in Europe. These delays were principally related to
the heavy construction activity in the oil and gas sector in North America,
which created capacity constraints at one of QuestAir's key suppliers that is
assembling the prototype plant skid. Consequently, Management now expects to
complete the fabrication of the prototype plant around the end of calendar 2006,
and to ship the prototype to Exxon's refinery early in the first quarter of
calendar 2007. The prototype plant will be installed and started up at the
refinery site during the first half of calendar 2007.
2007 Outlook and Milestones
Commenting of the outlook for fiscal 2007, Jonathan Wilkinson said:
"2007 will be a landmark year for QuestAir with the commercialization of our
H-6200 hydrogen purifier in the oil refining market. This product provides oil
refineries with a solution to the growing demand for hydrogen in oil refining,
as well as offering a unique tool to increase refinery productivity and
profitability. As such, we expect the H-6200 to be the key catalyst to drive
QuestAir to profitability and beyond."
"Our major objectives for the coming year include the installation and start up
of the prototype H-6200 hydrogen purifier at an ExxonMobil refinery, and the
subsequent first sale of a fully commercial H-6200 system in the oil refining
market. We also expect to see continued growth in the sale of our first
generation gas purifiers in the industrial hydrogen and biogas markets."
QuestAir's operational milestones for the remainder of fiscal 2007 are:
1.Complete the installation and startup of the prototype H-6200 hydrogen
purifier at an ExxonMobil refinery.
Management expects that the prototype H-6200 hydrogen purifier will be installed
and started up at the ExxonMobil refinery during the first half of calendar
2007.
2.Receive the first purchase order for a commercial H-6200 hydrogen
purifier.
EMRE and QuestAir are actively marketing the H-6200 to both ExxonMobil and third
party refineries, with the objective of securing a purchase order for the first
commercial sale during fiscal 2007.
3.Sign an agreement to extend the H-6200 platform technology into a new
market.
QuestAir has entered into a number of preliminary engineering contracts to
assess the application of the H-6200 platform technology into additional markets
such as natural gas processing and other separations in the petrochemical
industry. Based on the outcome of these preliminary studies, we aim to sign an
agreement to undertake the next phase of this product development.
4.Secure first purchase order for a methane purification system in the
European biogas market
There is significant interest in Europe in the use of renewable sources of
methane to supplement imported natural gas, and as a carbon neutral source of
transportation fuel for busses and cars. During the year, we expect to sell our
first system in the European market to recover high purity methane from biogas.
5.Increase recognized revenue to between $9 and $10 million.
Total recognized revenue is expected to be between $9 and $10 million in fiscal
2007, representing an increase of approximately 19% to 32% from $7.6 million in
fiscal 2006. We expect revenue growth from both our first generation commercial
products and anticipated engineering service contracts. Any commercial H-6200
orders received during fiscal 2007 are not expected to be recognized as revenue
during fiscal 2007 given the expected manufacturing and installation time of
these large units.
6.Manage cash used in operations and capital expenditures to between $7
and $8 million.
Cash used in operations and capital expenditures is expected to be in the range
of $7 to $8 million, reduced from $9.4 million in fiscal 2006. Expenditures on
both the commercialization of the H-6200 product, as well R&D activities related
to the extension of the H-6200 platform technology into new markets are expected
to continue through fiscal 2007.
It should be noted that we have made certain assumptions regarding the receipt
of new engineering service contracts and gas purification system sales in
determining our revenue and operational cash burn milestones for fiscal 2007.
Failure to secure certain of these contracts may have a material impact on our
recognized revenue and cash burn for fiscal 2007, and we will update our
financial guidance accordingly if our financial outlook is impacted in this way.
Fiscal 2006 Financial Results
Operating Results
The following table provides a breakdown of QuestAir's revenues from the sale of
gas purification systems and engineering service contracts for the reported
periods:
---------------- -----------------
($ '000) For the years ended September 30
2006 2005
---------------- ------------ --------
Gas purification systems 5,808 4,158
Engineering service contracts 1,750 2,134
---------------- ------------ --------
Total revenue 7,558 6,292
---------------- ------------ --------
The total recognized revenue of $7,558,093 for fiscal 2006 was in line with
revenue guidance of at least $7,500,000 provided by management on December 8,
2005. The increase in revenue from gas purification systems for fiscal 2006
resulted from increased sales of commercial pressure swing adsorption ("PSA")
systems including the H-3100 hydrogen purifier commissioned at the HydroEdge
liquid hydrogen plant in Japan, as well as revenue recognized towards the
construction of the prototype H-6200 hydrogen purifier to be demonstrated at an
ExxonMobil refinery. For accounting purposes, the sale of the H-6200 prototype
plant is treated as a long-term production-type contract. Consequently, in
accordance with GAAP, revenue from the H-6200 prototype plant is recognized on a
percentage-of-completion basis.
The decrease in revenue from engineering service contracts for fiscal 2006
resulted from reduced levels of work completed on the engineering service
contracts with EMRE, as the focus of the refinery program shifted from product
development to the construction of the prototype plant.
Fluctuations in recognized revenue and the receipt of new sales orders are to be
expected in the industrial markets that QuestAir currently serves. In addition,
the timing of receipt of new engineering service contracts can vary from year to
year. Consequently, management believes that both recognized revenue and changes
in the Company's sales order backlog should be monitored together to determine
the strength of QuestAir's commercial operations.
QuestAir's sales order backlog is defined as future revenue from signed
contracts that have not yet been recognized as revenue. The following table
provides an analysis of the changes in the Company's sales order backlog for the
years ended September 30, 2006 and 2005.
------------- ------------------ --------------------
(Unaudited, $ '000) For the year For the year
ended September 30, ended September 30,
2006 2005
------------- -------- -------- ------ --------- -------- -------
Gas Eng. Total Gas Eng. Total
Purification Service Purification Service
Systems Contracts Systems Contracts
------------- -------- -------- ------ --------- -------- -------
Opening 2,240 768 3,008 2,812 1,106 3,918
Balance
Bookings 8,642 1,226 9,868 3,897 1,951 5,848
Revenue
Recognized (5,808) (1,750) (7,558) (4,158) (2,134) (6,292)
Adjustments(1) (166) (108) (274) (311) (155) (466)
------------- -------- -------- ------ --------- -------- -------
Ending Balance 4,908 136 5,044 2,240 768 3,008
------------- -------- -------- ------ --------- -------- -------
The total sales order backlog increased by $2,036,344, or 68%, during fiscal
2006. The increase in backlog over the fiscal year was driven by orders valued
at $4,312,553 related to the prototype H-6200 hydrogen purifier and associated
equipment. In addition, QuestAir also received an order valued at approximately
$2,200,000 for a M-3100 methane recovery system for use in the landfill gas
processing market. A negative adjustment was made to sales order backlog as a
result of foreign exchange fluctuations during the year.
Management currently expects that the backlog as of September 30, 2006 will be
substantially recognized as revenue by March 31, 2007.
The following table provides a calculation of QuestAir's gross profit for the
reported years:
----------- ------------------
($ '000) For the years ended September 30
2006 2005
----------- ----------- ---------
Sales 7,558 6,292
Cost of goods sold 6,433 3,537
----------- ----------- ---------
Gross Profit 1,125 2,755
Gross Margin (%) 14.9% 43.8%
----------- ----------- ---------
The decrease in gross margin for fiscal 2006 compared to the prior year resulted
from a decrease in the proportion of revenue recognized from engineering service
contracts, which typically contribute high gross margins. In addition, losses
were incurred on the H-3100 hydrogen purifier installed at the HydroEdge liquid
hydrogen plant, and on the prototype H-6200 hydrogen purifier. Low margins were
expected on the HydroEdge plant since this was the first sale of the new larger
capacity H-3100 design for use in the intermediate capacity segment of the
hydrogen plant market, and certain non-recurring engineering costs were incurred
to increase the capacity of the H-3100 product design. Ultimately, a loss was
recognized on the sale due to unfavorable exchange rate fluctuations which
reduced recognized revenue, and higher than expected start-up costs.
EMRE and QuestAir had agreed that the prototype H-6200 would be sold to an
ExxonMobil refinery at cost, reflecting the fact that the prototype H-6200 is
intended, in part, for testing and demonstration purposes. Additional
functionality and test instrumentation were subsequently included in the plant
design to allow for additional testing under a wider range of conditions than is
required for the European refinery itself. QuestAir and EMRE agreed to share
these specific additional costs to reflect the shared future benefit that will
be derived from the additional test data. The additional costs associated with
enhanced functionality and test instrumentation resulted in an expected net loss
on the overall prototype plant. In accordance with GAAP, The Company recorded
the total expected loss on the H-6200 prototype as a cost of goods sold in
fiscal 2006.
It should be noted that both the HydroEdge and H-6200 prototype systems were the
first of their kind manufactured by QuestAir, and the Company made a strategic
investment in these units for market development purposes. As such, the losses
on these two sales do not reflect the expected future margins for the H-3100 or
H-6200 product lines.
Margins are expected to fluctuate from year to year depending on the mix of
revenues recognized from engineering service contracts and gas purification
systems.
Sales and marketing expenses were $1,938,537 for fiscal 2006, an increase of 9%
compared to $1,779,703 for the prior year. The increase in sales and marketing
expenses for fiscal 2006 was attributed to an increased level of sales
activities compared to the prior year.
The gross research and development ("R&D") expenditures, offsetting government
funding and the resulting net R&D expenditures for the relevant periods, were as
follows:
----------------- ------------------
($ '000) For the years ended September 30
2006 2005
----------------- ---------- ----------
Gross R&D Expenditure 6,907 7,667
Government & Partner Funding 1,815 1,933
----------------- ---------- ----------
Net R&D Expenditure 5,092 5,734
----------------- ---------- ----------
The 10% reduction in gross R&D expenditures for fiscal 2006 compared to the
prior year was due to a reduction in amount of R&D undertaken as resources were
redirected towards supporting the Company's commercial sales efforts and the
construction of the prototype H-6200 hydrogen purifier. Government funding
decreased for the year in proportion to the reduction in R&D undertaken on the
refinery development program with EMRE, which is eligible for funding from TPC.
General and Administrative ("G&A") expenses were $3,311,188 for fiscal 2006, a
decrease of 3% from $3,427,315 for the prior year. The decrease in G&A expenses
for the year related to a reduction in stock-based compensation expenses in the
year, partially offset by increases in accounting and regulatory expenses.
Stock-based compensation expense was $492,302 for fiscal 2006, a decrease of 35%
from $754,759 for the prior year. Stock-based compensation expenses were higher
for the prior year due to a stock compensation charge related to the repricing
of certain options at the time of the Company's IPO in fiscal 2005.
Amortization expenses were $1,223,788 for fiscal 2006 compared to $1,531,112 for
the prior year. The decrease in amortization expenses was a result of certain
capital assets becoming fully amortized during the year.
Net loss for fiscal 2006 was $10,262,918 ($0.24 per share) compared to
$9,516,858 ($0.31 per share) for the prior year. The increase in the net loss
for the year was primarily a result of reduced gross profits compared to the
prior year, partially offset by lower R&D and amortization expenses.
Loss per share is calculated based on the weighted average number of common
shares outstanding through the year. The reduction in the loss per share for the
year was a result of an increase in the weighted average number of common shares
outstanding compared to the prior year.
Capital expenditures net of Government funding and proceeds on sale ("Net
CAPEX"), for fiscal 2006 were $1,370,315 compared to $915,424 for the prior
year. The increased Net CAPEX for the year was driven by leasehold improvements
made to new hydrogen testing facilities that were built during fiscal 2006, as
well as expenditures on a demonstration landfill gas processing plant installed
at the Vancouver Landfill. It is expected that capital expenditures will
fluctuate from year to year depending on the requirements of specific product
development programs and administrative needs.
Liquidity and Capital Resources
At September 30, 2006 cash and short-term investments were $18,418,800, compared
to $10,311,823 for the prior year. Not included in cash and short-term
investments at September 30, 2006 was $1,256,354 of restricted cash, which will
primarily be used to fund equipment purchases for the prototype plant in future
periods.
Cash used by operations and capital requirements for the year ended September
30, 2006 was $9,430,679, compared to $8,694,629 for the prior year. Cash burn
for the year fell within the guidance range of $8,500,000 to $9,500,000 provided
by management on December 8, 2005. The increase in cash used by operations and
capital requirements for the year was driven by an increased loss for the year,
as well as increases in inventory and Net CAPEX. This was partially offset by
increases in accounts payable, accrued liabilities and deferred revenue, as well
as decreases in amortization and stock based compensation.
On May 31, 2006, the Company completed an equity offering, raising gross
proceeds of $20,000,250 through the sale of 14,815,000 common shares at a price
of $1.35 per share. Net proceeds after share issuance costs were $18,410,751.
During fiscal 2005, the Company signed a credit facilities agreement with
Comerica Bank. This agreement was amended and restated as part of the renewal of
these facilities in June 2006. The amended credit facilities include a US$1
million accounts receivable line of credit and a US$2 million term loan, in
addition to $673,212 outstanding under the original term loan agreement. Both
facilities are subject to annual renewal. As at September 30, 2006, QuestAir had
drawn $884,250 against the term loans net of repayments. The Company is in
compliance with all of its bank covenants.
On June 6, 2003, QuestAir was awarded a $9,600,000 conditionally repayable loan
from Technology Partnerships Canada ("TPC"), a funding program administered by
Industry Canada. At September 30, 2006, the Company had claimed $7,760,083
against this loan. Based on forecasted R&D expenditures, the Company expects to
draw down on the remaining $1,839,917 of TPC funding by the end of fiscal 2007.
QuestAir's authorized share capital consists of an unlimited number of common
shares, of which 52,393,065 common shares were issued and outstanding as of
September 30, 2006. In addition, the Company had 4,937,059 stock options
outstanding of which 3,413,604 were exercisable. During the year, 430,000
warrants that were issued to certain agents upon closing of the IPO expired
unexercised, leaving a total of 192,308 warrants outstanding as at September 30,
2006.
Further information on QuestAir's financial results for the year ended September
30, 2006 can be found in the Company's 'Management Discussion and Analysis' ("MD
&A") at www.sedar.com.
Consolidated Balance Sheets
--------------------------- ---------- ----------
Audited (expressed in Canadian dollars) As at As at
September 30, September 30,
2006 2005
ASSETS
Current assets:
Cash and cash equivalents $ 11,018,800 $ 10,311,823
Restricted cash 1,256,354 102,396
Short-term investments 7,400,000 -
Accounts receivable 1,476,024 1,075,255
Grants and funding receivables 454,597 493,913
Inventories 3,510,508 1,945,876
Prepaid expenses 337,335 299,757
---------- ----------
25,453,618 14,229,020
Property, plant and equipment 2,103,626 1,984,014
Other long-term assets 125,000 -
---------- ----------
$ 27,682,244 $ 16,213,034
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities $ 4,413,717 $ 2,210,686
Deferred revenue 1,946,781 1,602,103
Current portion of bank debt 351,398 216,839
Current portion of obligations under capital
lease - 110,357
---------- ----------
6,711,896 4,139,985
---------- ----------
Long term liabilities: 532,852 433,678
Bank debt
---------- ----------
7,244,748 4,573,663
---------- ----------
Shareholders' equity:
Share capital
Authorized
Unlimited common shares, voting, no par value
Unlimited preferred shares, issuable in series, no
par value
Common shares 109,020,202 89,774,802
Contributed surplus 6,462,772 6,647,129
Deficit (95,045,478) (84,782,560)
---------- ----------
20,437,496 11,639,371
---------- ----------
$ 27,682,244 $ 16,213,034
========== ==========
Consolidated Statements of Operations and Deficit
------------------ ----------------------------
Audited (expressed in Canadian dollars) For the year ended
September 30, September 30,
2006 2005
Revenues $ 7,558,093 $ 6,292,309
Cost of goods sold 6,432,954 3,537,068
--------- ---------
Gross profit 1,125,139 2,755,241
--------- ---------
Operating expenses
Research and development - net 5,092,174 5,733,846
General and administration 3,311,188 3,427,315
Sales and marketing 1,938,537 1,779,703
Amortization 1,223,788 1,531,112
--------- ---------
11,565,687 12,471,976
--------- ---------
Loss before undernoted (10,440,548) (9,716,735)
--------- ---------
Other income (expense)
Interest income 378,872 226,165
Other expense (201,242) (26,288)
--------- ---------
177,630 199,877
--------- ---------
Loss for the period (10,262,918) (9,516,858)
Deficit - Beginning of period (84,782,560) (73,560,609)
Preferred share conversion - (1,705,093)
--------- ---------
Deficit - End of period $(95,045,478) $ (84,782,560)
--------- ---------
Basic and diluted loss per share
$ (0.24) $ (0.31)
Weighted average number of common
shares outstanding 42,426,280 30,017,856
------------------------------ --------- ---------
Consolidated Statements of Cash Flows
------------------------------ ----------------
Audited (expressed in Canadian dollars) For the year ended
September 30, September 30,
2006 2005
Cash flows from operating activities
Loss for the period $ (10,262,918) $ (9,516,858)
Items not involving cash
Amortization 1,223,788 1,531,112
Gain on sale of property, plant and
equipment 8,619 (7,418)
Stock based compensation expense 492,302 754,759
Foreign currency loss (gain) 503 (9,661)
--------- ---------
(8,537,706) (7,248,066)
--------- ---------
Changes in non-cash operating working capital
Accounts, grants and funding receivables (361,454) (455,846)
Inventories (1,546,335) (269,864)
Prepaid expenses (162,579) (209,474)
Accounts payable and accrued liabilities 1,885,385 782,382
Deferred revenue 344,678 (378,337)
--------- ---------
159,695 (531,139)
--------- ---------
(8,378,011) (7,779,205)
--------- ---------
Cash flows from investing activities
Increase in short-term investments (7,400,000) -
Purchase of property, plant and equipment (1,155,334) (1,261,919)
Government grants and funding related to
property, plant and equipment 96,791 335,600
Proceeds on sale of property, plant and
equipment 5,875 10,895
Increase in restricted cash (1,153,958) (102,396)
--------- ---------
(9,606,626) (1,017,820)
--------- ---------
Cash flows from financing activities
Issuance of common shares 20,000,250 15,050,000
Share issue costs (1,589,499) (2,835,287)
Issuance of common shares on exercise of
stock options 157,991 20,470
Repayment of obligations under capital
lease (110,860) (115,568)
Repayment of bank debt (197,749) -
Term loan advance 431,481 650,518
Deferred charges - (353,208)
--------- ---------
18,691,614 12,416,925
--------- ---------
Increase in cash and equivalents 706,977 3,619,900
Cash and equivalents - Beginning of year 10,311,823 6,691,923
--------- ---------
Cash and equivalents - End of year $ 11,018,800 $ 10,311,823
========= =========
------------------------------ --------- ---------
-30-
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 refueling
stations. 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".
Forward-looking statements
This press release contains forward-looking statements, including statements
regarding the future success of our business, technology, and market
opportunities. Forward-looking statements typically contain words such as
"believes", "expects", "anticipates", "continue", "could", "indicates", "plans",
"will", "intends", "may", "projects", "schedule", "would" or similar expressions
suggesting future outcomes or events, although not all forward-looking
statements contain these identifying words. Examples of such statements include,
but are not limited to, statements concerning: (i) the expected shipment,
installation and demonstration timeline of a commercial-scale prototype of the
H-6200 hydrogen purifier; (ii) the expectation that fiscal 2007 will be a
landmark year for QuestAir with the commercialization of its H-6200 hydrogen
purifier in the oil refining market; (iii) the expected continued growth in the
sale of QuestAir's first generation gas purifiers in the industrial hydrogen and
biogas markets; and (iv) QuestAir's expected performance against the operational
and financial milestones for fiscal 2007 as described herein. These statements
are neither promises nor guarantees, but involve known and unknown risks and
uncertainties that may cause our actual results, level of activity, performance
or achievements to be materially different from any future results, levels of
activity, performance or achievements expressed in or implied by these
forward-looking statements. These risks include risks related to revenue growth,
operating results, industry and products, technology, competition and other
factors described herein.
Although the forward-looking statements contained herein are based upon what
management believes to be current and reasonable assumptions, the Company cannot
assure readers that actual results will be consistent with these forward-looking
statements. The forward-looking statements contained herein are made as of the
date of this press release and are expressly qualified in their entirety by this
cautionary statement. The Company undertakes no obligation to publicly update or
revise any such statements to reflect any change in our expectations or in
events, conditions, or circumstances on which any such statements may be based,
or that may affect the likelihood that actual results will differ from those set
forth in the forward-looking statements.
Contact Information:
QuestAir Technologies Inc. Canaccord Adams:
Andrew G. Hall Mark Ashurst
Director, Corporate Development Erin Needra
Phone: (001) 604-454-1134 Phone: +44 (0) 20 7050 6500
Email: hall@questairinc.com
Web: www.questairinc.com
UK media contact: Canadian media contact:
Charles Ryland Glen Edwards
Ben Willey Karyo Communications
Buchanan Communications Phone: (001) 604-623-3007
Phone: +44 (0) 20 7466 5000
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR FSUEEISMSEFE
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