For Immediate Release 25 January, 2005

QuestAir Announces 2004 Results and 2005 Milestones
BURNABY, B.C. - QuestAir Technologies Inc. ("QuestAir" or "the Company"; AIM: QAR; TSX: QAR) a developer and supplier of advanced gas purification systems for refinery, industrial and fuel cell markets reported today its financial results for the fiscal year ended September 30, 2004. All amounts are in Canadian dollars unless otherwise noted.

2004 Highlights

The signing of a five year Joint Development Agreement ("JDA") with ExxonMobil Research and Engineering Company ("EMRE") to evaluate specific projects to develop and commercialize large capacity hydrogen purification systems for a range of refinery and petrochemical applications. Revenue growth of 62% to $3.0 million (2003: $1.8 million); and an increase in the company's sales order backlog from $0.9 million to $3.9 million. A reduction in the cash used in operations and capital requirements to $5.7 million (2003: $11.9 million). The signing of a non-exclusive Supply and Distribution Agreement ("SDA") with Iwatani International Corporation ("Iwatani"), the largest vendor of industrial hydrogen in Japan. Receipt of the Company's first multi-unit order for 10 hydrogen purification systems from Plug Power Inc. (total value $0.9 million) for use in Plug's GenSite T hydrogen generation systems. Receipt of a $1.0 million order from Iwatani for two hydrogen purifiers for inclusion in the largest liquid hydrogen plant in Asia to be constructed in Osaka, Japan. The installation of hydrogen purification systems at the Senju and Oume hydrogen fueling demonstration projects, both located in Tokyo, Japan. The successful laboratory demonstration of a hydrogen recycle system to increase the efficiency of molten carbonate fuel cell systems.

Jonathan Wilkinson, President and CEO of QuestAir, said:

"The key highlight of the year was the signing of the Joint Development Agreement with EMRE, which provides QuestAir with significant new growth opportunities in a range of large, existing markets in the global energy industry."

"We also made significant progress with the growth of our revenues and order backlog through the sale of commercial gas purification systems and engineering service contracts. Other key accomplishments in the commercial area include the expansion of our product distribution channels through the SDA with Iwatani, and the significant orders from Plug Power and Iwatani."

For the year ended September 30, 2004, QuestAir recorded a net loss of $9.5 million ($1.94 per share), compared to a net loss of $16.1 million ($3.30 per share) for the year ended September 30, 2003.

Following the end of the fiscal year, on December 21, 2004 the Company completed an initial public offering ("IPO") of its securities on the AIM Market of the London Stock Exchange Plc and the Toronto Stock Exchange, raising gross proceeds of approximately $15.1 million through the sale of 8.6 million common shares. Upon completion of the IPO, the Company had approximately $17.6 million in combined cash and cash equivalents.

ExxonMobil Research and Engineering Company

Demand for hydrogen in oil refineries is expected to grow by up to 10% per year through to 2010, driven by regulations requiring reduced levels of sulphur in diesel fuel and the global increase in demand for petroleum products. The initial product that QuestAir is developing with EMRE provides refineries with a solution to this growth in hydrogen demand by recovering hydrogen from hydrogen-containing waste streams within refineries.

QuestAir's gas purification technology is based on its proprietary innovations in pressure swing adsorption ("PSA") technology that solve some of the inherent disadvantages of conventional PSA. Conventional PSA technology was introduced commercially in the 1960s and today is applied extensively in the production and purification of hydrogen, oxygen and nitrogen for industrial uses. QuestAir's fast-cycle PSA technology operates at significantly higher cycle speeds than conventional PSA, resulting in a direct reduction in the size of equipment required to purify a given volume of product gas.

The key features of the JDA with EMRE are as follows:

• The agreement provides a framework for a broad collaboration between QuestAir and EMRE, and contemplates the development of multiple products based on a common technology platform for use in the oil refining and petrochemical industries.
• The first project being undertaken under the JDA is the assessment and planned development of a large capacity hydrogen PSA for recovering hydrogen in oil refineries. During 2004, QuestAir received two engineering service contracts totaling $1.4 million to support product development work on this project. The Company expects to test a prototype of this product in the field at an oil refinery in the first half of 2006, with potential commercial orders following later in 2006.
• QuestAir will work exclusively with EMRE on the development of PSA products for refinery and petrochemical applications until 2007. Products developed under the JDA will be available for sale to third parties, subject to certain restrictions.

2005 Outlook and Milestones

Looking forward, highlights for the coming year include the receipt of an order for a prototype large capacity PSA from EMRE, and the continued growth of the Company's revenue from gas purification system sales and engineering service contracts.

QuestAir's milestones for the fiscal year ending September 30, 2005 are:

1. Receive a purchase order for a prototype large capacity hydrogen PSA.
   A key milestone in the first product development project being undertaken with EMRE is the sale of a prototype large capacity hydrogen PSA for demonstration at a refinery site.
2. Increase revenue by at least 100% over 2004 levels.
   Revenues generated from the sale of gas purification systems and engineering service contracts are anticipated to be at least $6 million in 2005.
3. Manage average cash used in operating activities and capital requirements to under $8.5 million.
   QuestAir's cash burn, excluding IPO offering costs, is expected to increase from $5.7 million in 2004 to up to $8.5 million in 2005 as a result of increased research and development activities, and increased capital expenditures related to the joint development program with EMRE.
4. Sign an additional distribution agreement for QuestAir's first generation gas purification products with a leading hydrogen plant vendor.
   In fiscal 2004, QuestAir signed its first distribution agreement with Iwatani covering the Asian market. The Company intends to leverage the resources and infrastructure of additional distribution partners in order to accelerate the penetration of its commercial PSA systems in specific market segments and geographies.
5. Receive the first purchase order for a methane purification system for landfill gas processing.
   Elevated natural gas prices, and concerns over greenhouse gas emissions have focused attention on renewable sources of methane fuel. Consequently, the processing of landfill gas and other renewable 'biogas' to pipeline- or LNG-grade methane has been identified as a key growth market for the Company.
6. Enter into an agreement to demonstrate use of QuestAir's technology for hydrogen recovery from molten carbonate fuel cell systems.
   QuestAir intends to develop products that recover purified hydrogen from the exhaust of molten carbonate fuel cell ("MCFC") systems, for customers who wish to produce hydrogen in addition to electrical power from the fuel cell. An example would be a hydrogen 'energy station' where the MCFC system is used to produce electrical power and hydrogen fuel for fuel cell vehicles.

2004 Financial Results

For the year ended September 30, 2004, QuestAir recorded a net loss of $9.5 million ($1.94 per share), compared to a net loss of $16.1 million ($3.30 per share) for the year ended September 30, 2003. The decrease in the net loss in 2004 compared to 2003 was primarily the result of increased gross profit from the sale of gas purification systems and engineering service contracts, reduced net research and development expenditures, and a reduction in general and administration expenses.

Operating Results

Revenues from the sale of gas purification systems and engineering service contracts were $3.0 million for the year ended September 30, 2004, a 62% increase from revenues of $1.9 million in 2003. Increased revenues from engineering service contracts were the primary drivers of increased revenues in 2004. The following table provides a breakdown of our revenues for the reported periods:

Revenue from sales of gas purification systems decreased by 23% to $1.2 million for the year ended September 30, 2004, from $1.6 million in 2003. This decrease was primarily the result of a delay in the delivery and acceptance of a large order for hydrogen purification systems. The remainder of the order was subsequently accepted during the first quarter of fiscal 2005. Engineering service contract revenues increased 573% to $1.8 million in 2004 from $0.3 million in 2003, primarily as a result of the completion of two engineering services contracts for EMRE.

As a result of the Company's revenue recognition policy (see note 1 to the financial statements included below), and the lengthy order-to-delivery cycle of the Company's commercial gas purification systems (typically 16 weeks), we believe that changes in the Company's sales order backlog are a useful indicator of the strength of our commercial operations. QuestAir's backlog is defined as future revenue from signed gas purification system sales and engineering service contracts that have not yet been recognized by the Company. The following table provides a breakdown of our sales order backlog for the reported periods:

Gross profit was $0.9 million for the year ended September 30, 2004, an increase of 157% over the gross profit of $0.4 million for 2003. As a percentage of total revenue, gross profit was 30% in 2004 compared with 19% in 2003. The increase in gross margin was generally attributed to reduced manufacturing costs, and a reduction in warranty costs. There were no warranty costs for the period ended September 30, 2004.

Sales and marketing expenses were $1.7 million for the year ended September 30, 2004, an increase of 33% over sales and marketing expenses of $1.3 million in 2003. This increase was attributed to increased salary expenses and other costs as the Company expanded its sales and marketing group in order to increase gas purification system sales.

Gross research and development expenses decreased 30% to $6.3 million for the year ended September 30, 2004 from $8.9 million in 2003. These expenses were partially offset by government and joint development partner funding contributions of $1.6 million and $2.0 million in 2004 and 2003 respectively, resulting in net research and development costs of $4.7 million and $6.9 million in 2004 and 2003 respectively. The decrease in net research and development expenditures was due to a reduction in certain research and product development activities focused on fuel cell related products. Government and development partner funding contributions decreased as a result of reduced overall research and development expenditures, since the Company's funding contributions from Technology Partnerships Canada are calculated as a percentage of gross research and development expenditures.

General and administrative expenses decreased 56% to $2.5 million for the year ended September 30, 2004 from $5.6 million in 2003. This reduction was generally related to a reduction in non-cash share based compensation and termination costs in 2004.

Gross capital expenditures for the period ended September 30, 2004 totaled $0.6 million, compared to $1.3 million in 2003. This reduction in capital expenditures was primarily a result of reduced research and development activities during 2004.

Liquidity and Capital Resources

Cash used by operations and capital requirements for the year ended September 30, 2004 was $5.7 million, compared to $11.9 million in 2003. The decrease is primarily due to a reduction in the level of research and development activities described above, increased government and partner funding receipts, and an increase in customer deposits for the sale of commercial gas purification systems.

Cash Resources and Subsequent Equity Financing

Cash and short term investments at September 30, 2004 were $6.7 million, compared to $12.4 million at the end of 2003. On December 21, 2004 the Company completed an IPO of its securities concurrently on the AIM Market of the London Stock Exchange Plc and the Toronto Stock Exchange, raising gross proceeds of approximately $15.1 million through the sale of 8.6 million common shares at a price of $1.75 per share. Upon completion of the IPO, the Company had approximately $17.6 million in combined cash and cash equivalents.

In June 2003, the Company was awarded a $9.6 million conditionally repayable loan from Technology Partnerships Canada, a funding program administered by Industry Canada. As of September 30, 2004, the Company had claimed a total of $3.9 million in funding against this loan.

As at December 31, 2004 QuestAir had 37,261,010 common shares issued and outstanding. In addition, the Company had 4,731,927 options to purchase common shares, and 622,308 warrants outstanding at that date.

Consolidated Balance Sheets

Consolidated Statements of Operations and Deficit

Consolidated Statements of Cash Flows

Notes to the financial statements

1. Significant accounting policies

Basis of presentation

These consolidated financial statements have been prepared in accordance with Canadian generally accepted accounting principles, which, except as disclosed in note 2, do not materially differ from accounting principles generally accepted in the United States. Further, the consolidated financial statements include the accounts of the Company and its inactive wholly owned subsidiary, QuestAir Technologies (USA) Inc.

Cash and cash equivalents

Cash and cash equivalents consist of cash on deposit and highly liquid short-term interest bearing securities with maturities at the date of purchase of three months or less.

Short-term investments

Short-term investments with maturities at the date of purchase of more than three months, all of which are categorized as available for sale, are carried at the lower of cost and market value.

Inventories

Inventories are recorded at the lower of cost and replacement cost for raw materials and supplies and at the lower of cost and net realizable value for work-in-progress and finished goods. Costs of raw materials are determined on an average cost basis. Work-in-progress and finished goods include materials, direct labour and production overhead. Inventories are recorded net of any obsolescence provision.

Property, plant and equipment

Property, plant and equipment are recorded at cost (net of third party funding) less accumulated amortization. Amortization is computed using the straight-line method over their estimated useful lives at the following rates:

Use of estimates

The preparation of financial statements in conformity with Canadian generally accepted accounting principles requires management to make estimates and assumptions, which affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the period. Actual results could differ from these estimates.

Income taxes

The Company follows the asset and liability method of accounting for income taxes. Under this method, future income taxes are recognized for the future income tax consequences attributable to differences between the financial statement carrying values and their respective income tax bases (temporary differences) and for the benefit of loss carry-forwards. Future tax assets and liabilities are measured using substantively enacted tax rates expected to apply to taxable income in the years in which temporary differences are expected to be recovered or settled. The effect on future income tax assets and liabilities of a change in tax rates is included in income in the period that includes the substantial enactment date. Future income tax assets are evaluated and if realization is not considered to be more likely than not, a valuation allowance is provided.

Research and development costs

Research costs are expensed as incurred. Development costs are expensed as incurred unless they meet certain criteria under Canadian generally accepted accounting principles for deferral and amortization, which relate primarily to technological feasibility, identified future markets of the product, and availability of resources to complete the project. The Company has determined that none of its development costs to date have met these criteria.

Government assistance and investment tax credits

Government assistance is recorded when receipt is reasonably assured as either a reduction of the cost of the applicable assets or a credit to the applicable expenses incurred in the statement of operations as determined by the terms and conditions of agreements under which the assistance is provided to the Company. A liability is recorded when repayment of the assistance is considered probable.

Investment tax credits are recorded when receipt is reasonably assured as either a reduction of the cost of the applicable assets or a credit to the expenses incurred in the statement of operations depending on the nature of the expenditures which gave rise to the credits.

Revenue recognition

The Company recognizes revenue on commercial equipment sales when title has transferred, the customer has accepted the product, there is persuasive evidence of an arrangement, collection is probable and the price is fixed or determinable. Provisions are established for estimated product returns and warranty costs at the time revenue is recognized. The Company records deferred revenue when cash is received in advance of all of these revenue recognition criteria being met.

Revenues from engineering service contracts are determined under the percentage-of-completion method whereby revenues are recognized on a pro rata basis in relation to contract costs incurred. Costs and estimated profit on contracts in progress in excess of amounts billed are reflected as work-in-progress. Cash received in advance of revenues being recognized on contracts is classified as deferred revenue.

Warranty costs

The Company provides for future warranty costs on products sold based on management's best estimates of such costs, taking into account past experience and the nature of the contracts.

Stock-based compensation plans

The Canadian Institute of Chartered Accountants (CICA) Accounting Standards Board has amended CICA Handbook Section 3870 - Stock-based Compensation and Other Stock-based Payments - to require entities to account for employee stock options using the fair value based method on or after January 1, 2004. Under the fair value based method, compensation cost is measured at fair value at the date of grant and is expensed over the award's vesting period. In accordance with the transitional options permitted under amended Section 3870, the Company prospectively applied the fair value based method to all employee stock options granted on or after October 1, 2002. Under the prospective method of adoption selected by the Company, stock-based employee compensation is recognized for all employee options granted, modified or settled on or after October 1, 2002, using the fair value based method. The resulting compensation expense is charged to operations over the vesting period, except for awards to non-employees whereby the compensation expense is recognized when the goods or services from the non-employees are received.

For periods prior to October 1, 2002, the Company used the intrinsic value based method for recognizing stock based compensation, except for awards issued to non-employees, which were accounted for using the fair value based method.

Financial Instruments

a) Foreign exchange risk

Predominantly all of the Company's sales are in United States dollars. The Company does not hold or issue financial instruments to manage its exposure to currency rate fluctuations relating to sales. The value of United States dollar denominated sales for the year ended September 30, 2004 was $3,001,590; September 30, 2003 - $1,847,594.

2. United States generally accepted accounting principles

The Company follows generally accepted accounting principles in Canada (Canadian GAAP), which are different in certain respects from those applicable in the United States (U.S. GAAP). The significant differences between Canadian GAAP and U.S. GAAP with respect to the Company's consolidated financial statements are described below.

Consolidated Statements of Operations and Deficit

Consolidated Balance Sheet

Consolidated Statements of Cash Flows

a) Redeemable preferred shares

Prior to November 5, 2002, the Company's Class A and B redeemable preferred shares were split into liability and equity components under Canadian GAAP. Under U.S. GAAP, a value was assigned to the beneficial conversion feature relating to the preferred shares with the balance presented as temporary equity on the balance sheet. As the preferred shares were redeemable, the balance that was presented as temporary equity was being accreted to the preferred share redemption amount. As a result, under Canadian GAAP the Company recorded a larger accretion charge each period compared to the accretion charge recorded under U.S. GAAP. In addition, under Canadian GAAP the accretion charge was recorded in the statement of operations, whereas for U.S. GAAP the accretion was recorded as a charge to deficit and included in the loss per share calculation.

On November 5, 2002, the retraction provisions of the Class A and B preferred shares were eliminated. As a result of these modifications, these preferred shares were reclassified to equity for U.S. and Canadian GAAP purposes.

For the period from November 5, 2002 to July 1, 2003,