Geotech Ltd.

Aeroquest International Limited (TSX: AQL) Announces Unaudited Financial Results for the Three and Nine Months Ended June 30, 2011

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Source: Geotech Ltd.

- Revenue of $9.2 Million, Up $0.5 Million, or 6% from Q3 of 2010
- Contract Backlog Decreases to $14.4 Million from $15.6 Million in Q2 of 2011
- EBITDA of Negative $2.4 Million, Down $0.8 Million from Q2 of 2011, Impacted by Weather & Logistics

TORONTO, ONTARIO -- (Marketwire) -- 08/11/11 -- Aeroquest International Limited ('Aeroquest', or 'the Company') (TSX: AQL) today reported financial results for its third quarter of fiscal 2011, the three and nine months ended June 30, 2011 ('Q3-F2011'). These results reflect a challenging quarter in Airborne Geophysics as a combination of market conditions, unscheduled and extended scheduled aircraft maintenance, weather, permitting and other logistical issues significantly impacted the Company's performance.

'We posted a difficult and disappointing quarter,' said Bob Motz, Interim CEO and CFO of Aeroquest. 'We faced further difficult weather conditions in our fixed-wing operations as well as delays due to aircraft and technical maintenance issues. We were also slowed down internationally due to delays in permitting. Helicopter services experienced weakness as a result of market conditions.'

Consolidated revenue for Q3-F2011 was $9.2 million, an increase of $0.5 million or 6% over the third quarter last year ('Q3-F2010'). Revenue from Airborne Geophysics was $6.7 million, an increase of $0.9 million from Q3-F2010 of last year. Fixed-wing revenue improved to $4.2 million from $3.6 million in Q3-F2010, while helicopter services revenue improved to $2.5 million from $2.2 million in Q3-F2010.

Hampered by significant scheduled and unscheduled maintenance and permitting delays, fixed- wing production showed a decrease of 5% over the previous quarter. Helicopter margins at 9 % are significantly below Management's expectations as a result of lower sales having to absorb the fixed cost component of cost of sales.

Revenue from Aerial Geomatics was $2.3 million, consistent from Q3-F2010 while revenue from the Instruments and Sensors segment was $0.2 million, a decline of $0.4 million from Q3-F2010.

Year to date 2011 revenue is $31.3 million, an increase of $8.9 million, or 40% from the third quarter of 2010.

Overall gross profit margin in Q3-F011 was 19% compared with 21% in Q3-F2010 and 23% in the Q2 of fiscal 2011. EBITDA(1)in the quarter was negative $2.4 million, an increase of the loss of $1.6 million over the negative $0.8 million reported in Q3-F2010 and an increase of loss of $0.9 million from the second quarter of fiscal 2011.

Profit margins in Airborne Geophysics were negatively impacted by fixed-wing services due to the reasons previously indicated. Q3-F2011 fixed-wing gross margins were 21% compared with 24% in Q3-F2010 but a significant improvement from the 11% margin reported in the second 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 decreased slightly to 9% Q3-F2011 from 10% in Q3-F2010 but significantly down from 38% reported in the second quarter of fiscal 2011.

Year to date gross margins were 21% in fixed-wing and 24% in helicopter services compared to 18% and 14% respectively in the first nine months of fiscal 2010.

Aerial Geomatics gross profit margins were 24% of revenue, a slight increase of 1% from the second quarter and are 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. As the business grows, the acquisition of Mapcon will allow the Company the means to realize savings through the greater use of third party offshore processing facilities.

Selling, general and administrative ('SG&A) expenses increased by $1.3 million or 48 percent from Q3-F2010, reflecting increased activity in operations, as well as severance cost obligations in Q3-F2011 for several senior executives.

Consolidated net loss in Q3-F2011 was $3.7 million or $0.10 per share compared to net loss of $1.8 million, or $0.05 per share in Q3-F2010. Year to date fiscal 2011 consolidated net loss is $6.9 million or $0.18 per share compared with a consolidated net loss of $6.3 million or $0.17 per share in the first nine months of fiscal 2010.

Cash flow from operating activities was $1.0 million, or $0.03 per share in Q3-F2011, as compared to $2.6 million, or $0.07 per share in Q3-F2010. The $1 million increase in cash in Q3-F2011 was the result of an improvement in non-cash working capital of $2.9 million. Capital expenditures totaled $0.6 million in Q3-F2011, an increase of $0.2 million from Q3-F2010.

Contract Backlog

Contract backlog decreased by $1.2 million from $15.6 million at March 31, 2011 to $14.4 million at June 30, 2011. Backlog is composed of $11.7 million in Airborne Geophysics survey backlog ($2.9 million in helicopter and $8.8 million in fixed-wing), $2.7 million in Aerial Geomatics backlog. There is no backlog in our instruments and sensors group. However, subsequent to the quarter, in July the Instruments and Sensors Group received two contracts with a total value of $1.4 million.

Short Term Prospectus

During the quarter, the Company reported that it elected not to proceed with its previously announced best efforts offering of units (each comprised of a common share and a half-warrant) and withdrew the short form prospectus filed with regulatory authorities in Canada.

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 the custom design and construction of geophysical sensors and instruments through Aeroquest Sensortech (Geophex).

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

                                                Jun. 30, 2011 Sep. 30, 2010
Assets
  Current
    Cash and cash equivalents                   $   2,032,288 $   4,757,216
    Accounts receivable                             3,837,894     4,527,942
    Income tax recoverable                            795,970       231,136
    Unbilled contracts in progress                  1,976,593     1,529,146
    Inventory                                         133,455       699,935
    Prepaid expenses and deposits                   1,242,155     1,465,629
                                                ----------------------------
Total current assets                               10,018,355    13,211,004
                                                ----------------------------
  Long term
    Long term investments                              49,275       171,828
    Capital assets                                 10,572,267     9,766,989
    Intangible assets                              10,967,343    13,277,339
    Goodwill                                       12,097,214    11,821,304
    Future income taxes                             2,478,594     2,314,545
                                                ----------------------------
Total long term assets                             36,164,693    37,352,005
                                                ----------------------------
Total Assets                                    $  46,183,048 $  50,563,009
                                                ----------------------------
                                                ----------------------------

Liabilities and Shareholders' Equity
  Current
    Accounts payable and accrued liabilities    $   5,993,101 $   4,697,656
    Deferred revenue                                2,374,048     2,240,687
    Capital lease obligations                          23,974       200,964
    Current portion of long term debt                 149,072             -
                                                ----------------------------
Total current liabilities                           8,480,195     7,139,307
                                                ----------------------------
  Long term
    Capital lease obligations                               -         9,264
    Long term debt                                    644,871             -
    Future income taxes                             3,672,317     4,603,674
                                                ----------------------------
Total Liabilities                                  12,797,383    11,752,245
                                                ----------------------------

Shareholders' equity
    Share capital                                  48,940,127    48,527,057
    Contributed surplus                             2,387,219     2,355,274
    Accumulated other comprehensive income          3,437,526     2,404,764
    Retained earnings                             (21,379,207)  (14,476,331)
                                                ----------------------------
Total shareholders' equity                         33,385,665    38,810,764
                                                ----------------------------
Total Liabilities and Shareholders' Equity      $  46,183,048 $  50,563,009
                                                ----------------------------
                                                ----------------------------
   AEROQUEST INTERNATIONAL LIMITED CONSOLIDATED STATEMENTS OF OPERATIONS


                             Three months ended           Nine months ended
                    Jun. 30, 2011 Jun. 30, 2010 Jun. 30, 2011 Jun. 30, 2010

Sales               $   9,161,703  $  8,646,003  $ 31,263,790  $ 22,350,983
 Cost of sales          7,432,165     6,802,843    23,593,127    18,126,360
                    -------------------------------------------------------
Gross profit            1,729,538     1,843,160     7,670,663     4,224,623
                    -------------------------------------------------------

Expenses and other
 items
 General and
  administrative        3,940,751     2,660,086    10,469,647     7,278,557
 Foreign exchange
  (gain)/loss              12,395     (121,319)       311,312        59,804
 Stock based
  compensation
  expense                 158,354        84,919       370,578       254,648
 Amortization of
  intangible assets       861,345       828,028     2,550,735     2,560,083
 Depreciation of
  capital assets        1,042,672       871,101     2,444,724     2,626,438
                    -------------------------------------------------------
Total operating
 expenses               6,015,517     4,322,815    16,146,996    12,779,530
                    -------------------------------------------------------

Operating profit      (4,285,979)   (2,479,655)   (8,476,333)   (8,554,907)
 Other costs
  (income)              (129,955)      (50,530)     (265,259)     (284,816)
 Interest Expense               -             -             -             -
                    -------------------------------------------------------
Loss before income
 taxes and
 discontinued
 operations           (4,156,024)   (2,429,125)   (8,211,074)   (8,270,091)
                    -------------------------------------------------------
Loss from
 discontinued
 operations                     -             -             -     (240,518)
                    -------------------------------------------------------
Loss before income
 taxes                (4,156,024)   (2,429,125)   (8,211,074)   (8,510,609)
                    -------------------------------------------------------
Income taxes
 Current                (181,115)     (511,772)     (255,795)   (1,552,826)
 Future                 (307,099)     (123,050)   (1,052,403)     (629,410)
                    -------------------------------------------------------
Total Income taxes      (488,214)     (634,822)   (1,308,198)   (2,182,236)
                    -------------------------------------------------------
Net income for the
 period             $ (3,667,810)  $(1,794,303)  $(6,902,876)  $(6,328,373)
                    -------------------------------------------------------
                    -------------------------------------------------------

Earnings per share
 Basic              $      (0.10)  $     (0.05)  $     (0.18)  $     (0.17)
 Diluted            $      (0.10)  $     (0.05)  $     (0.18)  $     (0.17)
Note: Prior period revenue and expenses have been restated to reflect the
disclosure of part of the operations as discontinued.
Net income does not change. See note 16 to the financial statements.

AEROQUEST INTERNATIONAL LIMITED CONSOLIDATED STATEMENTS OF RETAINED EARNINGS

                              Three months ended           Nine months ended
                     Jun. 30, 2011 Jun. 30, 2010 Jun. 30, 2011 Jun. 30, 2010

Retained earnings
 (deficit),
 beginning of period $(17,711,397) $(10,423,217) $(14,476,331) $ (5,889,147)
Net loss               (3,667,810)   (1,794,303)   (6,902,876)   (6,328,373)
                    --------------------------------------------------------
Retained earnings,
 end of period       $(21,379,207) $(12,217,520) $(21,379,207) $(12,217,520)
                    --------------------------------------------------------

  AEROQUEST INTERNATIONAL LIMITED CONSOLIDATED STATEMENTS OF COMPREHENSIVE
                                    INCOME

                              Three months ended           Nine months ended
                     Jun. 30, 2011 Jun. 30, 2010 Jun. 30, 2011 Jun. 30, 2010

Net loss for the
 period              $ (3,667,810) $ (1,794,303) $ (6,902,876) $ (6,328,373)

Revaluation of long
 term investments to
 fair market value        (70,000)        48,071      (73,578)       (2,172)
Unrealized
 gain/(loss) on
 translation of
 self-sustaining
 foreign operations        991,608     (657,904)     1,106,340   (1,399,594)
Total Other
 Comprehensive
 Income (loss)             921,608     (609,833)     1,032,762   (1,401,766)
                    --------------------------------------------------------
Total comprehensive
 income (loss), for
 the period          $ (2,746,202) $ (2,404,136) $ (5,870,114) $ (7,730,139)
                    --------------------------------------------------------

    AEROQUEST INTERNATIONAL LIMITED CONSOLIDATED STATEMENTS OF CASH FLOW

                              Three months ended           Nine months ended
                     Jun. 30, 2011 Jun. 30, 2010 Jun. 30, 2011 Jun. 30, 2010

Cash provided by
 (used in) Operating
 activities
  Net income for the
   period             $(3,667,810)  $(1,794,303)  $(6,902,876)  $(6,328,373)
  Operating items not
   requiring cash
  Depreciation of
   capital assets        1,042,672       871,101     2,444,724     2,626,438
  Amortization of
   intangible assets       861,345       828,028     2,550,735     2,560,083

  Future income taxes    (307,099)     (123,050)   (1,052,403)     (629,410)
  Stock based
   compensation            158,354        84,919       370,578       254,648
  Loss/(gain) on
   disposal of
   capital assets                -      (17,678)         5,955     (376,405)
                     -------------------------------------------------------
Operating cash flow
 before changes in
 non-cash working
 capital               (1,912,538)     (150,983)   (2,583,287)   (1,893,019)
  Changes in non-cash
   working capital       2,917,828     2,702,915     3,281,865     2,276,962
                     -------------------------------------------------------
Total cash flow from
 operating activities    1,005,290     2,551,932       698,578       383,943
                     -------------------------------------------------------

Investing activities
  Capital asset
   purchases             (581,778)     (368,056)   (1,919,603)     (838,740)
  Proceeds from sale
   of equipment                  -        17,679             -       510,290
  Long term
   investments
   acquired                      -             -             -      (90,000)
  Cash cost of
   acquisition                   -             -   (1,384,210)             -
                     -------------------------------------------------------
Total cash flow from
investing activities     (581,778)     (350,377)   (3,303,813)     (418,450)
                     -------------------------------------------------------

Financing activities
  Capital lease
   payments               (31,332)     (122,320)     (194,553)     (474,431)
  Proceeds from
   issuance of common
   shares on exercise
   of employee stock
   options                   8,100             -        74,860        25,450
                     -------------------------------------------------------
Total cash flow from
 financing activities     (23,232)     (122,320)     (119,693)     (448,981)
                     -------------------------------------------------------

Net change in
 cash/cash
equivalents for the
 period                    400,280     2,079,235   (2,724,928)     (483,488)
Cash and cash
 equivalents,
 beginning of period     1,632,008     3,583,061     4,757,216     6,145,784
                     -------------------------------------------------------
Cash and cash
 equivalents, end of
 period               $  2,032,288  $  5,662,296  $  2,032,288  $  5,662,296
                     -------------------------------------------------------

 

Contacts:
Aeroquest International Limited
Bob Motz
Interim CEO and CFO
416-204-1500
bmotz@aeroquest.ca
www.aeroquest.ca

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