Airiq Inc.TSXV: IQ

Q3 (AirIQ FS FYE Dec 31 2024)

Feb 12, 2025 at 11:00 PM UTC · Issued by Airiq Inc.

Consolidated Interim Financial Statements (Unaudited)

AirIQ Inc.

For the Three and Nine Months Ended December 31, 2024

Notice to Reader:

The following consolidated interim financial statements have been prepared by Management of AirIQ Inc. and have not been reviewed by the Company's external auditors.

AirIQ Inc.

CONSOLIDATED INTERIM STATEMENTS

OF FINANCIAL POSITION

(UNAUDITED)

(in thousands of Canadian dollars)

	December 31, 2024	March 31, 2024
	$	$
ASSETS
Current assets	3,100
Cash and cash equivalents (note 3d)	3,125
Prepaid expenses and deposits	112	145
Trade and other receivables (note 15b)	392	251
Inventory (note 5)	444	484
Total current assets	4,048	4,005
Non-current assets	845
Software (note 6)	781
Rental units (note 6)	887	925
Property and equipment (note 6)	26	11
Customer contracts (note 7)	455	438
Deferred tax asset	2,948	2,948
Total non-current assets	5,161	5,103

Total assets	9,209	9,108
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities	479
Accounts payable and accrued liabilities (note 15c)	593
Deferred revenues (note 8)	525	549
Total current liabilities	1,004	1,142
Non-current liabilities	57
Deferred revenues (note 8)	68
Total non-current liabilities	57	68
Total liabilities	1,061	1,210
Shareholders' equity	91,337
Share capital (note 10(a))	91,336
Other paid-in capital (note 10(b))	4,448	4,448
Contributed surplus (note 10(c))	3,064	2,979
Deficit	(90,701)	(90,865)
Total shareholders' equity	8,148	7,898

Total liabilities and shareholders' equity	9,209	9,108
Authorized for issue on behalf of the Board:	"Vernon Lobo"	"Geoffrey Rotstein"
See accompanying notes	Director	Director

AirIQ Inc.

CONSOLIDATED INTERIM STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (UNAUDITED)

(in thousands of Canadian dollars except per share amounts)

	Three Months Ended		Nine Months Ended
		December 31st			December 31st
		2024		2023			2024		2023
		$		$			$		$
Revenues		1,200					3,572
Recurring revenue			1,091				3,271
Hardware and other revenue		107		108			657		1,030
Total revenues		1,307		1,199			4,229		4,301
Direct cost of sales (notes 5 and 6)		490		430			1,674		1,756
Gross profit		817		769			2,555		2,545
Expenses		350					1,073
Sales and marketing			236				667
Research and development		28		24			100		76
General and administration		340		262			882		801
Total expenses (note 12)		718		522			2,055		1,544
Income before other expenses		99		247			500		1,001
Other expenses		(18)					(70)
Interest income			(29)				(73)
Depreciation and amortization (notes 6 and 7)		115		93			337		277
Foreign exchange loss (gain)		(73)		17			(62)		32
Stock-based compensation (note 11(a))		26		24			97		84
Loss on disposal of fixed assets (note 6)		21		7			34		15
Total other expenses		71		112			336		335

Net income and comprehensive income for the year		28		135			164		666

Net income per share (note 18)
Basic	$	-	$	0.01	$	0.01	$	0.02
Diluted	$	-	$	0.01	$	0.01	$	0.02

See accompanying notes

AirIQ Inc.

CONSOLIDATED INTERIM

STATEMENT OF CASH FLOWS

(UNAUDITED)

(in thousands of Canadian dollars)
	Three Months Ended		Nine Months Ended
	December 31st		December 31st
	2024	2023		2024	2023
	$	$	$	$
Cash flows from operating activities
Net income for the period	28	135	164	666
Adjustments to reconcile profit to net cash used in operating activities
Stock-based compensation (note 11(a))	26	24	97	84
Depreciation of property, plant and equipment (note 6)	169	151	492	447
Amortization of customer contracts (note 7)	31	16	91	46
Loss on disposal of fixed assets (note 6)	21	7	34	15
Changes in non-cash balances related to operations
Trade and other receivables	(70)	(43)	(141)	141
Inventory	79	136	40	59
Prepaid expenses and deposits	13	27	33	63
Accounts payable and accrued liabilities	(30)	(156)	(114)	(278)
Deferred revenue (note 8)	(50)	(181)	(35)	36
Total cash inflows (outflows) from operating activities	217	116	661	1,279
Cash flows from investing activities
Software (note 6)	(77)	(65)	(306)	(250)
Rental units (note 6)	(69)	(69)	(240)	(220)
Property, plant and equipment (note 6)	(12)	(7)	(21)	(7)
Acquisition of customer contracts (note 7)	-	-	(108)	-
Total cash outflows from investing activities	(158)	(141)	(675)	(477)
Cash flows from financing activities
Proceeds from exercise of stock options	-	8	12	8
Repurchase of common shares under NCIB (note 10)	(16)	-	(23)	-
Total cash inflows from financing activities	(16)	8	(11)	8
Net change in cash and cash equivalents	43	(17)	(25)	810
Cash and cash equivalents at beginning of period	3,057	3,003	3,125	2,176
Cash and cash equivalents at end of period	3,100	2,986	3,100	2,986
Supplementary disclosure
Cash	1,550	553	1,550	553
Cash equivalents (note 3d)	1,550	2,450	1,550	2,450

See accompanying notes

AirIQ Inc.

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (DEFICIENCY)

(UNAUDITED)

(in thousands of Canadian dollars)

		Other
	Share	paid-in	Contributed
	capital	capital	surplus	Deficit	Total
	$	$	$	$	$

Balance as at March 31, 2023	91,374	4,448	2,872	(91,734)	6,960
Income for the period	-	-	-	666	666
Proceeds from exercise of stock options	56	-	(48)	-	8
Stock based compensation	-	-	84	-	84
Balance as at December 31, 2023	91,430	4,448	2,908	(91,068)	7,718
Income for the period	-	-	-	203	203
Reallocation from exercise of stock options	(42)	-	42	-	-
Stock based compensation	-	-	29	-	29
Common shares repurchased under NCIB	(52)	-	-	-	(52)
Balance as at March 31, 2024	91,336	4,448	2,979	(90,865)	7,898
Income for the period	-	-	-	164	164
Proceeds from exercise of stock options	24	-	(12)	-	12
Stock based compensation	-	-	97	-	97
Common shares repurchased under NCIB	(23)	-	-	-	(23)
Balance as at December 31, 2024	91,337	4,448	3,064	(90,701)	8,148

See accompanying notes

AirIQ Inc.

NOTES TO THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS (UNAUDITED)

(in thousands of Canadian dollars except share and per share amounts)

For the Three and Nine Months Ended December 31, 2024

1. CORPORATE INFORMATION

AirIQ Inc. ("AirIQ" or the "Company") is a public company that trades on the TSX Venture Exchange ("TSXV"), under the symbol "IQ". The Company was formed under the Canada Business Corporations Act. The Company's principal business is to develop and operate a telematics asset management system using specialized software, digitized mapping, wireless communications, the internet and the Global Positioning System ("GPS"). The Company's head office is located at 1099 Kingston Road, Suite 207 in Pickering, Ontario.

These consolidated interim financial statements have been authorized for issue by the Board of Directors on February 19, 2025.

2. BASIS OF PREPARATION

These consolidated interim financial statements of the Company for the three and nine Months Ended December 31, 2024, including comparatives, have been prepared in accordance with IAS 34 - Interim Financial Reporting using the accounting policies consistent with International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board ("IASB") and its interpretations, and using the same accounting policies and methods as were used for the Company's annual financial statements and notes thereto for the years ended March 31, 2024 and 2023, except for any new accounting pronouncements which have been adopted. Changes to significant accounting policies are described in note 3.

These consolidated interim financial statements do not include all of the information and disclosures required by International Financial Reporting Standards ("IFRS") for annual financial statements. Accordingly, these consolidated interim financial statements should be read in conjunction with the Company's annual financial statements as at and for the years ended March 31, 2024 and 2023 and the accompanying notes thereto.

The preparation of consolidated interim financial statements in compliance with IFRS requires management to make certain critical accounting estimates. It also requires management to exercise judgment in applying the Company's accounting policies. The areas involving a higher degree of judgment of complexity, or areas where assumptions and estimates are significant to the consolidated interim financial statements are disclosed in note 4.

AirIQ Inc.

NOTES TO THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS (UNAUDITED)

(in thousands of Canadian dollars except share and per share amounts)

For the Three and Nine Months Ended December 31, 2024

2. BASIS OF PREPARATION continued

These consolidated interim financial statements have been prepared on a historical cost basis. In addition, the consolidated interim financial statements are prepared using the accrual basis of accounting except for cash flow information and should be read in conjunction with the Company's financial statements for the year ended March 31, 2024.

These consolidated interim financial statements are presented in Canadian dollars, which is also the Company's functional currency, and all values are rounded to the nearest thousand (CAD $'000) except per share amounts, unless otherwise indicated.

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The accounting policies set out below have been consistently applied to all periods presented.

Basis of consolidation

Subsidiaries are those entities where the Company is exposed to, or has rights to, variable returns as well as the ability to affect those returns through the power, either directly or indirectly, to direct the financial and operating policies of the entity. These consolidated financial statements include the accounts of AirIQ and its wholly-owned subsidiaries, AirIQ U.S. Holdings, Inc. ("AirIQ Holdings"), AirIQ U.S., Inc. ("AirIQ USA"), and AirIQ, LLC ("AirIQ LLC"). All inter-company balances and transactions have been eliminated on consolidation.

Inventory

Inventory is valued initially at cost and subsequently at the lower of cost and net realizable value. Cost comprises all costs of purchase, costs of conversion and other costs incurred in bringing the inventory to its present location and condition using a weighted average cost basis. Net realizable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and selling expenses. Obsolete, redundant and slow moving inventory is identified and written down to estimated net realizable values.

Software, rental units and property, plant and equipment

Software, rental units and property, plant and equipment are initially recorded at cost and subsequently measured at cost less accumulated depreciation. Depreciation is calculated using the straight-line method based on the following estimated useful lives:

Software	5 years
Rental units	5 years
Office equipment	5 years

Cash and cash equivalents

Cash and cash equivalents consist of cash on deposit and highly liquid investments, such as GICs, subject to minimal risk of changes in value and which have original maturities of 3 months or less at the date of purchase or can be converted to cash at any time. Changes in the fair value of the Company's cash and cash equivalents are included in interest income each period. Cash equivalents are designated as at fair value through profit and loss, which are measured at fair value.

AirIQ Inc.

NOTES TO THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS (UNAUDITED)

(in thousands of Canadian dollars except share and per share amounts)

For the Three and Nine Months Ended December 31, 2024

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued

Intangible assets

Intangible assets are recorded at cost less accumulated amortization, and accumulated impairment losses (if any). The intangible assets consist of customer contracts and they are amortized over their estimated useful lives of 5 years on a straight-line basis.

Impairment of non-financial assets

Non-financial assets, including software, rental units, property, plant and equipment, intangible assets and costs of deferred revenues are subject to review for indicators of impairment at least annually or whenever events or changes in circumstances indicate that their carrying amount may not be recoverable. If any impairment indicators exist, an impairment test is performed. Where the carrying value of an asset exceeds its recoverable amount, which is the higher of value in use and fair value less costs to sell, the asset is written down to its recoverable amount.

Where it is not possible to estimate the recoverable amount of an individual asset, the impairment test is carried out on the asset's cash-generating unit, which is the lowest group of assets in which the asset belongs for which there are separately identifiable cash inflows that are largely independent of the cash inflows from other assets.

An impairment loss is charged to the consolidated statement of income.

Revenue recognition

The Company earns revenue through the supply of GPS solutions for asset management services in the commercial and consumer markets. Revenue is measured at the fair value of the consideration received or receivable for services, net of discounts and sales taxes. Consideration received from customers in advance is recorded as deferred revenue.

Provided the amount of revenue can be measured reliably and it is probable that the Company will receive any consideration, revenue for services is recognized in the period in which they are rendered.

The principal sources of revenue to the Company and recognition of these revenues are as follows:

1. Revenue from equipment sold with service contracts is recognized at the time of sale.
2. Revenue from equipment leased is recorded on a straight-line basis over the term of the lease.
3. Revenue from equipment sold with a month-to-month service plan is recognized at the time of the sale.
4. Revenue from providing wireless-based services is recognized when the services are provided.
5. Revenue from the sale of component parts and lost units is recognized in the period in which they are sold.
6. Payments received from customers in advance of revenue recognition are recorded as deferred revenue and recognized as the services are provided.
Research and development costs

Research costs are expensed as incurred. Development costs are expensed as incurred unless a project meets the criteria of an intangible asset. As at December 31, 2024 and 2023, the Company has capitalized certain development costs.

AirIQ Inc.

NOTES TO THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS (UNAUDITED)

(in thousands of Canadian dollars except share and per share amounts)

For the Three and Nine Months Ended December 31, 2024

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued

Share-basedpayments

The Company has an employee share-based payment plan that is described in note 11.

As part of its remuneration, the Company grants stock options and warrants to buy common shares of the Company to its employees. An individual is classified as an employee when the individual is an employee for legal or tax purposes (direct employee) or provides services similar to those performed by a direct employee, including directors of the Company. The fair values of employees' services are determined indirectly by reference to the fair value of the equity instruments granted. This fair value is measured at the grant date, using the Black-Scholes option pricing model, and is recognized over the vesting period, based on the best available estimate of the number of share options expected to vest. Estimates are subsequently revised if there is any indication that the number of share options expected to vest differs from previous estimates.

Equity-settled share-based payment transactions with parties other than employees are measured at the fair value of the goods or services received, except where that fair value cannot be estimated reliably, in which case they are measured at the fair value of the equity instruments granted, measured at the date the entity obtains the goods or the counterparty renders the service.

All share-based remuneration is ultimately recognized as an expense in the consolidated statements of income with a corresponding credit to contributed surplus. Upon exercise of stock options and warrants, the proceeds received net of any directly attributable transactions costs and the amount originally credited to contributed surplus are allocated to share capital. When options and warrants expire unexercised, the related value remains in contributed surplus.

Foreign currency translation

In preparing the financial statements of the individual entities, transactions in currencies other than the entity's functional currency (foreign currencies) are recorded at the rates of exchange prevailing at the dates of the transactions. At each reporting date, foreign currency monetary assets and liabilities are translated using the reporting date foreign exchange rate. Foreign currency non-monetary assets and liabilities are translated using the historical rate on the date of the transaction. Non-monetary assets and liabilities that are stated at fair value are translated using the historical rate on the date that the fair value was determined. All gains and losses on translation of these foreign currency transactions are included in the consolidated statement of income.

Income per share

Basic income per share is determined by dividing net income attributable to common shareholders by the weighted average number of common shares outstanding during the period. Diluted income per share is calculated by dividing net income by the weighted average number of common shares outstanding during the period after giving effect to potentially dilutive financial instruments.

AirIQ Inc.

NOTES TO THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS (UNAUDITED)

(in thousands of Canadian dollars except share and per share amounts)

For the Three and Nine Months Ended December 31, 2024

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued

Financial instruments

Financial assets and financial liabilities are recognized when the Company becomes a party to the contractual provisions of the financial instrument. All of the Company's financial assets and financial liabilities are measured initially at fair value plus directly attributable transactions costs, except for financial assets and financial liabilities carried at fair value through profit or loss, which are measured initially at fair value.

All financial assets and financial liabilities except cash equivalents are initially recognized at the fair value and subsequently carried at amortized cost using the effective interest rate method, less provision for impairment. Cash equivalents are classified as fair value through profit or loss. They are carried at fair value with gains or losses recognized in the consolidated statement of income.

The impairment of financial assets under IFRS 9 is based on an expected credit loss (ECL) model. IFRS 9 applies to financial assets measured at amortized cost and contract assets and requires that the Company considers factors that include historical, current and forward-looking information when measuring the ECL. The Company uses the simplified approach for measuring losses based on the ECL for trade receivables. Amounts considered uncollectible are written off and recognized in sales and marketing general expenses in the consolidated statement of income.

Financial instruments recorded at fair value on the consolidated statements of financial position are classified using a fair value hierarchy that reflects the significance of the inputs used in making the measurements. The fair value hierarchy has the following levels:

Level 1 - valuation based on quoted prices (unadjusted) in active markets for identical assets or liabilities;
Level 2 - valuation techniques based on inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and
Level 3 - valuation techniques using inputs for the asset or liability that are not based on observable market data (unobservable inputs).

As of December 31, 2024 and 2023, the Company's cash equivalents are carried at fair value and are classified as Level 2 in the fair value hierarchy.

Transaction costs incurred in the course of raising debt financing are netted against the carrying value of the liability and then amortized over the expected life of the instrument using the effective interest rate method to expense interest over the period to maturity of the related debt. Other transaction costs incurred are included in the consolidated statement of income.

Warranty

The Company has provided a warranty on its hardware devices against defects in material and workmanship, with the exception of defects caused by abuse, misuse, accident, alteration, modification, neglect or incorrect installation, operation or removal of the equipment, for a period of one (1) year from the date of installation or purchase. The Company's obligation during the warranty period is to either replace or repair a defective unit, at its sole option. Estimated costs associated with the repair or replacement are included in the Company's direct cost of sales.