Geotech Ltd.

Aeroquest International Limited (TSX: AQL) Announces Financial Results for the Three and Six Months Ended March 31, 2011

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Source: Geotech Ltd.

- Revenue of $9.7 million up $3.9 million, or 68% from Q2 of 2010
- Contract backlog improves to $15.6 million from $11.2 million in Q1 of 2011
- EBITDA of negative $1.5 million a decrease of $0.2 million from Q2 of 2010

TORONTO, ONTARIO -- (Marketwire) -- 05/13/11 -- Attention business/financial editors and reporters:

Aeroquest International Limited (TSX: AQL) ('Aeroquest', or 'the Company') today reported financial results for its second quarter of fiscal 2011, the three and six months ended March 31, 2011 ('Q2-F2011'). These results reflect a challenging quarter in Airborne Geophysics as a combination of weather, permitting and other logistical issues as well as unexpected maintenance activity all reduced productivity - especially in fixed wing services. Consolidated revenue for Q2-F2011 was $9.7 million, an increase of $3.9 million or 68% over the first quarter of last year ('Q2-F2010'). Revenue from Airborne Geophysics was $7.8 million, an increase of $4.1 million from Q2-F2010 of last year. Fixed wing revenue improved to $4.4 million from $1.2 million in Q2-F2010, while helicopter services revenue improved to $3.3 million from $2.5 million in Q2-F2010.

In Australia, the combination of rain and flooding in Eastern Australia and record heat in Western Australia resulted in much lower than normal production in those areas in the period. In Africa, several surveys were delayed due to delays in obtaining the necessary government permits to fly in the countries of several countries including Mauritania, with the result that these aircraft were unable to fly, some for up to a month in the quarter.

The poor performance of the fixed wing fleet was offset to some degree by continued improvement in helicopter services. Helicopter services continue to recover both in revenue and margin terms.

Revenue from Aerial Geomatics was $1.8 million, an increase of $0.1 million from Q2-F2010 while revenue from the Instruments and Sensors segment was $0.2 million, a decline of $0.2 million from Q2-F2010.

Year to date 2011, revenue is $22.1 million, an increase of $8.8 million, or 67% from the first six months of 2010.

Overall gross profit margin in Q2-F011 was 23% compared with 19% in Q2-F2010 and 30% in the Q1 of fiscal 2011. EBITDA (1)in the quarter was negative $1.5 million, a decrease of $0.2 million over the negative $1.3 million reported in Q2-F2010 and a decrease of $1.9 million from the first quarter of fiscal 2011.

Profit margins in Airborne Geophysics were negatively impacted by fixed wing services due to the reasons previously indicated. Q2-F2011 fixed wing gross margins were 11% compared with 5% in Q2-F2010 but a significant decline from the 30% margin reported in the first quarter of 2011. Management expects that fixed wing margins will improve in future quarters as weather improves and proactive steps are taken to manage logistical issues. Helicopter margins improved to 38% in Q2-F2011 from 16% in Q2-F2010 and a helicopter gross margin of 22% in the first quarter of fiscal 2011.

Year to date, gross margins were 22% in fixed wing and 31% in helicopter services compared to 14% and 16% respectively in the first six months of fiscal 2010.

Aerial Geomatics gross profit margins were 22% of revenue, an improvement from the 7% reflected in the first quarter but still below management's expectations. The Company is well underway in the integration of the Aeroquest Optimal unit with the Mapcon unit that was acquired on January 31, 2011. Mapcon has already provided additional revenue and will begin to realize savings through the greater use of third party offshore processing facilities as the business grows.

Consolidated net loss in Q2-F2011 was $2.3 million or $0.06 per share compared to net loss of $2.3 million, or $0.06 per share in Q2-F2010. Year to date fiscal 2011 consolidated net loss is $3.2 million or $0.09 per share compared with a consolidated net loss of $4.5 million or $0.12 per share in the first six months of fiscal 2010.

Cash flow from operating activities was negative $2.0 million, or $0.05 per share in Q2-F2011, as compared to negative $0.7 million, or $0.02 per share in Q2-F2010. Of the negative $2.0 million in the most recent quarter, $1.2 million reflects non-cash working capital changes. Capital expenditures totaled $1.0 million in Q2-F2011, an increase of $0.7 million from Q2- F2010. Of the capital expenditures, $0.4 million relates to a new airborne digital mapping camera acquired for our Aerial Geomatics group. The total cost of this camera was $1.1 million, of which $0.7 million was financed through vendor financing, with the net of $0.4 million reflected in the Cash Flow Statement. Management expects capital expenditures for the balance of the year to be higher than in fiscal 2010 to reflect ongoing or expected improvements to the market for its systems in all segments.

Contract Backlog

Contract backlog improved by $4.4 million to $15.6 million at March 31, 2011 from $11.2 million at December 31, 2010. Backlog is composed of $11.8 million in Airborne Geophysics survey backlog ($2.3 million in helicopter and $9.5 million in fixed wing), $3.6 million in Aerial Geomatics backlog, and $0.2 million in backlog in our instruments and sensors group.

About Aeroquest International

Aeroquest collects and interprets data that reveals what is at and beneath the earth's surface. Aeroquest applies the best available technology in its world-wide search for economic concentrations of mineral and petroleum resources and in the precision-mapping of the earth's surface and objects upon it. Aeroquest offers airborne geophysics surveys through Aeroquest Airborne, aerial geomatics surveys through Aeroquest Optimal and Mapcon Mapping, and the custom design and construction of geophysical sensors and instruments through Aeroquest Sensortech.

With over 150 employees and contractors, and a fleet of over two dozen helicopter and fixed wing survey systems worldwide, Aeroquest is surveying on every continent in the world where exploration activity is underway, and over its history has logged over 10 million line kilometers of fixed wing surveys and over 1 million line kilometers of helicopter surveys - enough to circle the globe over 300 times. More information about Aeroquest International can be found at www.aeroquest.ca.

For Investors

This news release may include statements about expected future events and/or financial results that are forward-looking in nature and subject to risks and uncertainties. The Company cautions that actual performance will be affected by a number of factors, many of which are beyond its control. Future events and results may vary substantially from what the Company currently foresees. Discussion of the various factors that may affect future results is contained in the Company's recent filings, available on SEDAR.

(1)EBITDA stands for earnings before interest, taxes, depreciation and amortization. It is a financial metric used to analyze operating results. The Company defines EBITDA as revenue less cost of sales, cash operating costs (general and administrative expenses as well as foreign currency gains/losses) and stock-based compensation expense. It is not a standard measure under Generally Accepted Accounting Principles and as such EBITDA as calculated may not be comparable to similarly titled amounts reported by other companies.

                     AEROQUEST INTERNATIONAL LIMITED
                        CONSOLIDATED BALANCE SHEET

                                             Mar. 31, 2011  Sep. 30, 2010
Assets
 Current
  Cash and cash equivalents                  $   1,632,008  $   4,757,216
  Accounts receivable                            5,124,726      4,527,942
  Income tax recoverable                           588,137        231,136
  Unbilled contracts in progress                 2,309,610      1,529,146
  Inventory                                        138,831        699,935
  Prepaid expenses and deposits                  1,432,442      1,465,629
                                            ------------------------------
Total current assets                         $  11,225,754  $  13,211,004
                                            ------------------------------
 Long term
  Long term investments                      $     145,307  $     171,828
  Capital assets                                10,888,342      9,766,989
  Intangible assets                             11,577,111     13,277,339
  Goodwill                                      11,826,887     11,821,304
  Future income taxes                            2,361,231      2,314,545
                                            ------------------------------
Total long term assets                       $  36,798,878  $  37,352,005
                                            ------------------------------
Total Assets                                 $  48,024,632  $  50,563,009
                                            ------------------------------
                                            ------------------------------

Liabilities and Shareholders' Equity
 Current
  Accounts payable and accrued liabilities   $   4,668,507  $   4,697,656
  Deferred revenue                               2,735,576      2,240,687
  Capital lease obligations                         55,192        200,964
  Current portion of long term debt                142,650              0
                                            ------------------------------
Total current liabilities                    $   7,601,925  $   7,139,307
                                            ------------------------------
 Long term
  Capital lease obligations                              0          9,264
  Long term debt                                   602,100              0
  Future income taxes                            3,854,771      4,603,674
                                            ------------------------------
Total Liabilities                            $  12,058,796  $  11,752,245
                                            ------------------------------

Shareholders' equity
Share capital                                $  48,928,222  $  48,527,057
Contributed surplus                              2,233,093      2,355,274
Accumulated other comprehensive income           2,515,918      2,404,764
Retained earnings                              (17,711,397)   (14,476,331)
                                            ------------------------------
Total shareholders' equity                      35,965,836     38,810,764
                                            ------------------------------
Total Liabilities and Shareholders' Equity   $  48,024,632  $  50,563,009
                                            ------------------------------
                                            ------------------------------

                      AEROQUEST INTERNATIONAL LIMITED
                   CONSOLIDATED STATEMENTS OF OPERATIONS

                             Three months ended            Six months ended

                         Mar. 31,      Mar. 31,      Mar. 31,      Mar. 31,
                             2011          2010          2011          2010


Sales               $   9,749,915  $  5,770,246  $ 22,102,087  $ 13,268,112
 Cost of sales          7,528,211     4,665,979    16,160,962    10,877,232
                   ---------------------------------------------------------
Gross profit        $   2,221,704  $  1,104,267  $  5,941,125  $  2,390,880
                   ---------------------------------------------------------

Expenses and other
 items
  General and
   administrative   $   3,448,775  $  2,190,850  $  6,528,896  $  4,587,661
  Foreign exchange
   (gain)/loss             83,501       100,036       298,917       181,123
  Stock based
   compensation
   expense                184,491        84,920       212,224       169,729
  Amortization of
   intangible
   assets                 838,985       857,487     1,689,390     1,732,055
  Depreciation of
   capital assets         712,029       875,189     1,402,052     1,755,337
                   ---------------------------------------------------------
Total operating
 expenses           $   5,267,781  $  4,108,482  $ 10,131,479  $  8,425,905
                   ---------------------------------------------------------

Operating profit    $  (3,046,077) $ (3,004,215) $ (4,190,354) $ (6,035,025)
  Other costs
   (income)              (135,304)     (146,021)     (135,304)     (264,347)
  Interest Expense              -        14,838             -        30,061
                   ---------------------------------------------------------
Loss before income
 taxes and
 discontinued
 operations         $  (2,910,773) $ (2,873,032) $ (4,055,050) $ (5,800,739)
                   ---------------------------------------------------------
Loss from
 discontinued
 operations         $           -  $   (118,036)            -  $   (280,745)
                   ---------------------------------------------------------
Loss before income
 taxes              $  (2,910,773) $ (2,991,068) $ (4,055,050) $ (6,081,484)
                   ---------------------------------------------------------
Income taxes
  Current           $    (386,238) $   (602,763)      (74,680) $ (1,041,054)
  Future                 (265,644)     (120,635)     (745,304)     (506,360)
                   ---------------------------------------------------------
Total Income taxes  $    (651,882) $   (723,398) $   (819,984) $ (1,547,414)
                   ---------------------------------------------------------
Net income for the
 period             $  (2,258,891) $ (2,267,670) $ (3,235,066) $ (4,534,070)
                   ---------------------------------------------------------

Earnings per share
  Basic                    -$0.06        -$0.06        -$0.09        -$0.12
  Diluted                  -$0.06        -$0.06        -$0.09        -$0.12

                      AEROQUEST INTERNATIONAL LIMITED
                CONSOLIDATED STATEMENTS OF RETAINED EARNINGS

                          Three months ended               Six months ended

                Mar. 31, 2011  Mar. 31, 2010  Mar. 31, 2011   Mar. 31, 2010

Retained
 earnings
 (deficit),
 beginning of
 period       $   (15,452,506) $  (8,155,547)  $(14,476,331)  $  (5,889,147)
Net loss           (2,258,891)    (2,267,670)    (3,235,066)     (4,534,070)
              --------------------------------------------------------------
Retained      $
 earnings, end
 of period        (17,711,397) $ (10,423,217)  $(17,711,397)  $ (10,423,217)
              --------------------------------------------------------------
              --------------------------------------------------------------

                      AEROQUEST INTERNATIONAL LIMITED
              CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME


                          Three months ended               Six months ended

                       Mar. 31,     Mar. 31,       Mar. 31,        Mar. 31,
                           2011         2010           2011            2010

Net loss for the
 period            $ (2,258,891) $(2,267,670)  $ (3,235,066)  $  (4,534,070)
Revaluation of
 long term
 investments to
 fair market value       (6,118)       1,929         (3,578)        (50,248)
Unrealized
 gain/(loss) on
 translation of
 self-sustaining
 foreign
 operations            (338,469)    (626,732)       114,732        (741,687)
                  ----------------------------------------------------------
Total Other
 Comprehensive
 Income (loss)     $   (344,587) $  (624,803)  $    111,154   $    (791,935)
                  ----------------------------------------------------------
Total
 comprehensive
 income (loss),
 for the period    $ (2,603,478) $(2,892,473)  $ (3,123,912)  $  (5,326,005)
                  ----------------------------------------------------------
                  ----------------------------------------------------------

                      AEROQUEST INTERNATIONAL LIMITED
                    CONSOLIDATED STATEMENTS OF CASH FLOW

                             Three months ended            Six months ended

                       Mar. 31,       Mar. 31,       Mar. 31,      Mar. 31,
                           2011            2010          2011          2010
Cash provided by
 (used in)
 Operating
 activities
  Net income for
   the period      $ (2,258,891) $   (2,267,670) $ (3,235,066) $ (4,534,070)
  Operating items
   not requiring
   cash
  Depreciation of
   capital assets       712,029         875,189     1,402,052     1,755,337
  Amortization of
   intangible
   assets               838,985         857,487     1,689,390     1,732,055
  Future income
   taxes               (265,644)       (120,635)     (745,304)     (506,360)
  Stock based
   compensation         184,491          84,920       212,224       169,729
  Loss/(gain) on
   disposal of
   capital assets             -        (358,727)        5,955      (358,727)
                  ----------------------------------------------------------
Operating cash
 flow before
 changes in non-
 cash working
 capital           $   (789,030) $     (929,436) $   (670,749) $ (1,742,036)
  Changes in non
   cash working
   capital           (1,193,276)        175,515       364,037      (425,953)
                  ----------------------------------------------------------
Total cash flow
 from operating
 activities        $ (1,982,306) $     (753,921) $   (306,712) $ (2,167,989)
                  ----------------------------------------------------------

Investing
 activities
  Capital asset
   purchases       $   (950,804) $     (307,261) $ (1,337,825) $   (470,684)
  Proceeds from
   sale of
   equipment                  -         162,211             -       492,611
  Long term
   investments
   acquired                   -               -             -       (90,000)
  Cash cost of
   acquisition       (1,384,210)              -    (1,384,210)            -
                  ----------------------------------------------------------
Total cash flow
 from investing
 activities        $ (2,335,014) $     (145,050) $ (2,722,035) $    (68,073)
                  ----------------------------------------------------------

Financing
 activities
  Capital lease
   payments            (110,746) $     (210,255) $   (163,221) $   (352,111)
  Proceeds from
   issuance of
   common shares
   on exercise of
   employee stock
   options               65,500          21,000  $     66,760        25,450
                  ----------------------------------------------------------
Total cash flow
 from financing
 activities        $    (45,246) $     (189,255) $    (96,461) $   (326,661)
                  ----------------------------------------------------------
Net change in cash
 / cash
 equivalents for
 the period        $ (4,362,566) $   (1,088,226) $ (3,125,208) $ (2,562,723)
Cash and cash
 equivalents,
 beginning of
 period               5,994,574       4,671,287     4,757,216     6,145,784
                  ----------------------------------------------------------
Cash and cash
 equivalents,
end of period      $  1,632,008  $    3,583,061  $  1,632,008  $  3,583,061
                  ----------------------------------------------------------
                  ----------------------------------------------------------

 

Contacts:
Aeroquest International Limited
www.aeroquest.ca

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