TORONTO, ONTARIO--(Marketwire - March 7, 2012) -

Attention business/financial editors and reporters:

Aeroquest International Limited (TSX:AQL) ("Aeroquest", or "the Company") today reported financial results for its first quarter of fiscal 2012, the three months ended December 31, 2011 ("Q1-F2012"). These results reflect increased competition and pricing pressure as well as logistical delays resulting in gross margin compression.

"We are disappointed that the gains we saw in the fourth quarter of fiscal 2011 were not reflected in the first quarter" said Bob Motz, President and CEO of Aeroquest; "We continue to face problems mobilizing our aircraft to certain countries and this is impacting our ability to effectively utilize our fleet. Our cash position remains below where we want to be at $1.2 million as of December 31, 2011 and has continued to decline into the second quarter. We have scaled back our variable cost structure where possible but the ability to fund future improvements to our technology as well as grow our operations will be predicated on improving our cash balances either through generating cash from operations or finding alternative sources of capital.

A Special Committee established by the Board of Directors has been evaluating strategic alternatives for the Company for a period of time and is currently evaluating several proposals any of which if consummated would address the cash shortfall. However, there is no assurance that any of these transactions will come to fruition."

Consolidated revenue for Q1-F2012 was $7.9 million, a decrease of $2.9 million or 26% over the first quarter last year ("Q1-F2011"). Revenue from Airborne Geophysics was $7.0 million, a decrease of $3.5 million from Q1-F2011 of last year. Fixed wing revenue declined to $4.5 million from $6.1 million in Q1-F2011, while helicopter services revenue declined to $2.5 million from $2.8 million in Q1-F2011. Also in Q1-F2011 revenues is the outright sale of one AeroTEM™ IV system realizing revenue of $1.6 million.

Revenue from Aerial Geomatics was $0.4 million, all of which was from the Aeroquest Mapcon operations acquired on January 31, 2011. Revenue from the Aeroquest Optimal operations that were sold on December 1, 2011 has been excluded and the net results reported through results from discontinued operations.

Revenue from the Instruments and Sensors segment was $0.4 million compared with $0.3 million in Q1-F2011.

Q1-F0212 represents the first quarter that the company has transitioned to International Financial Reporting Standards ("IFRS"). One of the changes resulting from IFRS is that management has elected to report its operating expenses by function within the Statement of Income. This IFRS policy choice requires that depreciation related to assets used directly in providing services be included in cost of sales. This has the effect of reducing overall gross profit margins. Comparative quarters have been restated to reflect this change.

Overall gross profit margin was 16% compared with 28%. EBITDA¹ in the quarter was negative $0.4 million, a decrease of $1.1 million over the positive $0.7 million reported in Q1-F2011 and a decrease of $0.8 million from the $0.4 million reported in the fourth quarter of last year.

Profit margins in Airborne Geophysics declined to 11.6% compared to 27.1% in Q1-F2011. Fixed wing margins were 9.8% of revenue compared to 24.1% of revenue in Q1-F2011. Fixed wing margins were negatively impacted by logistical and permitting delays in mobilizing aircraft to several countries - including a delay of seven weeks in moving one aircraft to India to commence a survey. Helicopter margins improved to 14.9% compared to 12.7% in Q1-F2011. Q1-F2011 also included the sale of one AeroTEM system reflecting gross margin of 62.5% in that period.

Aerial Geomatics gross profit margins were 52.2% of revenue which is above management's expectations and reflects profitability on several contracts completed in the quarter. Management expects margins to decline from these levels to below 40% in future quarters.

On December 1, 2011, we announced that we had sold our Aeroquest Optimal operations to a third party for total proceeds of US$1.2 million. The Aeroquest Optimal operations for the period up to the sale generated a net loss of $0.1 million compared to $0.4 million in Q1-F2011.

General and administrative expenses (inclusive of depreciation & amortization related to these functions) declined by $0.5 million to $2.2 million from $2.7 million in Q1-F2011. This decline reflects management's efforts to reduce overall administrative costs to better align these businesses to the size and scale of the overall operations. These activities continued into the second quarter to rationalize overall costs.

Consolidated net loss in the quarter was $1.5 million or $0.04 per share compared to net loss of $1.0 million, or $0.03 per share in the first quarter last year.

Cash flow from operating activities was negative $0.3 million or $0.01 per share in Q1-F2012 compared to $1.7 million, or $0.05 per share for the period in Q1-F2011. Capital expenditures totaled $0.4 million in Q1-F2012, in line with the activity in Q1-F2011.

Outlook - Q2 - 2012

Contract backlog increased by $1.8 million, from September 30, 2011 to $11.2 million at December 31, 2011. Backlog is composed of $8.2 million in Airborne Geophysics survey backlog ($0.8 million in helicopter and $7.4 million in fixed wing), $1.4 million in Aerial Geomatics backlog, and $1.6 million in backlog in our instruments and sensors group.

Readers are encouraged to review the Interim Financial Statements or Management's Discussion & Analysis ("MD&A") either on our website ([ www.aeroquest.ca ]) or on SEDAR ([ www.sedar.com ]) for further discussion on liquidity.

Recent Developments - Strategic Alternatives

As noted above, Aeroquest has formed a special committee to review strategic alternatives open to Aeroquest. Aeroquest has learned that there are rumours in the marketplace about the nature of a possible transaction involving Aeroquest. Aeroquest is concerned that these rumours may contribute to changes in its share price or level of trading activity. While our corporate policy is not to comment on rumours or speculation, in the interest of our shareholders, Aeroquest is confirming that over the past several weeks, it has been engaged in discussions with a number of parties concerning a possible transaction. At the present time, there can be no assurance that any transaction will be completed, and we will advise the market of material changes in respect of Aeroquest when they occur.

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.

With over 120 employees and contractors, and a fleet of over twenty 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.

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