For Immediate Release 26 April, 2005

QuestAir Reports Second Quarter 2005 Results
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 unaudited financial results for the second quarter of fiscal 2005, ended March 31, 2005. All amounts are in Canadian dollars unless otherwise noted.

Second Quarter Highlights

• Continued progress on the development program being undertaken with ExxonMobil Research and Engineering Company ("EMRE"), including the receipt of a $1.3 million engineering services contract from EMRE. This order was included in the Company's sales order backlog at March 31, 2005.
• Revenues of $1.5 million for the quarter, and $2.5 million for the half year ended March 31, 2005 (H1 fiscal 2004: $1.1 million), in line with the Company's revenue guidance of $6 million for the fiscal year.
• QuestAir's sales order backlog at quarter end was $5.4 million, essentially flat compared to $5.5 million at December 31, 2004, and increased by 86% from $2.9 million at March 31, 2004.
• Cash used in operations and capital requirements of $2.7 million for the quarter and $4.7 million for the half year ended March 31, 2005, in line with the Company's cash burn guidance of $8.5 million for the fiscal year.
• The signing of a Memorandum of Understanding ("MOU") with FuelCell Energy to evaluate the use of QuestAir's hydrogen purification technology to produce pure hydrogen from the exhaust of FuelCell Energy's fuel cell power plants.
• The installation of a QuestAir H-3200 hydrogen purifier at a ChevronTexaco hydrogen energy station in Chino, California, and an order for a H-3200 for a second hydrogen station currently being constructed by ChevronTexaco in Oakland, California.

Jonathan Wilkinson, President and CEO of QuestAir, said:

"We are pleased with our overall revenue growth during the second quarter, representing a 50 per cent increase from the first quarter of fiscal 2005."

"We continue to make progress with our key development program with ExxonMobil. The $1.3 million engineering service contract received from ExxonMobil during the second quarter provides us with the funds to complete the development and design of a large capacity hydrogen purifier for use in oil refineries. Record demand for petroleum products, as well as increased processing of lower quality, high sulphur crudes has increased demand for hydrogen in oil refining - and the large capacity hydrogen purifier that we are developing with ExxonMobil is aimed squarely at addressing this need."

Operating Review

During the quarter, QuestAir continued to make good progress with the program being undertaken with EMRE to develop a large capacity hydrogen purification system for use in oil refineries and petrochemical plants, highlighted by the receipt of a $1.3 million engineering services contract from EMRE. The contract, which runs to mid 2006, covers both the design of a prototype system to be tested at an ExxonMobil refinery in 2006, as well as the subsequent design of commercial systems. Design and test work continued during the quarter in preparation for the prototype test, including detailed site meetings at the candidate ExxonMobil refinery.

QuestAir also made significant progress in the emerging hydrogen infrastructure market during the quarter, with a QuestAir H-3200 hydrogen purifier being successfully installed at the ChevronTexaco Hydrogen Energy Station in Chino, California. This unit has consistently achieved the demanding purity specifications recently set by the California Fuel Cell Partnership for fuel cell vehicle grade hydrogen. A follow-on order for a second H-3200 was also received from ChevronTexaco for a hydrogen station currently under construction in Oakland, California. In both these stations, QuestAir's compact gas purification technology is integrated with Chevron's proprietary hydrogen generation technology to demonstrate the cost effective production of hydrogen from natural gas at the fueling station. ChevronTexaco expects to construct up to five additional stations in California under a US Department of Energy cost-share program, and the blueprint plan recently published by the California Hydrogen Highway Network calls for the construction of 50-100 hydrogen stations in California by 2010.

Also during the quarter, QuestAir signed a Memorandum of Understanding with FuelCell Energy, Inc., a world leader in the development and manufacture of stationary fuel cell power plants with over 36 installations around the world. Under the terms of the MOU, the parties will evaluate the use of QuestAir's hydrogen purification technology to produce pure hydrogen from the exhaust of FuelCell Energy's Direct FuelCell® power plants. Purified byproduct hydrogen produced in this way can be used by FuelCell Energy's customers for industrial uses, or to fuel fleets of fuel cell vehicles, thereby increasing the functionality of the fuel cell power plant beyond the generation of electrical power and heat. As part of the work, QuestAir and FuelCell Energy will also cooperate to secure funded demonstrations of this 'hydrogen export' technology.

Outlook

Commenting on the outlook for the remainder on fiscal 2005, Jonathan Wilkinson said:

"We are pleased with our performance for the second quarter, and based on our expected commercial and product development activities over the next six months, we remain confident of achieving our revenue guidance of $6 million and cash burn guidance of $8.5 million for fiscal 2005."

"The key development for the remainder of the year will be the receipt of a purchase order for the prototype hydrogen purifier from ExxonMobil, which we expect to receive in the fourth quarter of fiscal 2005."

Q2 2005 Financial Results

For the quarter ended March 31, 2005, QuestAir recorded a net loss of $1.8 million ($0.05 per share), compared to a net loss of $2.6 million ($0.52 per share) for the same period in 2004. The net loss for the half year ended March 31, 2005 was $4.4 million ($0.19 per share), compared to a net loss of $5.2 million ($1.05 per share) for the same period in 2004. The reduction in the net loss for the quarter and the half year compared to the comparable periods in 2004 was primarily the result of increased gross profit from the sale of gas purification systems and engineering service contracts.

Operating Results

Total revenue for the quarter ended March 31, 2005 was $1.5 million, compared to $1.1 million for the same period in 2004. This increase in total revenue was mainly attributed to an increase in revenue from engineering service contracts for the quarter. Total revenue for the half year ended March 31, 2005 was $2.5 million, compared to $1.1 million for the same period in 2004. Increases in revenues from both gas purification systems and engineering service contracts contributed to the increase in total revenue for the half year compared to the same period in 2004.

The following table provides a breakdown of our revenues for the reported periods:

QuestAir's sales order 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 the Company's sales order backlog at March 31, 2005, December 31, 2004, September 30, 2004 and March 31, 2004:

The total sales order backlog decreased by $0.1 million, or 2%, for the quarter ended March 31, 2005, primarily as a result of a decrease in the backlog of gas purification system orders from $4.1 million to $3.6 million over the quarter. The decrease in the backlog of gas purification systems reflected a reduced level of gas purification system sales orders during the quarter. Quarter-to-quarter fluctuations in recognized revenue and the receipt of new sales orders are to be expected in the industrial markets that the Company currently serves. Measures including the extension of QuestAir's commercial products into multiple markets, and the growth of revenue generating engineering service contracts have been implemented to reduce the variability of QuestAir's commercial business. The total sales order backlog increased 38% from $3.9 million to $5.4 million for the half year ended March 31, 2005. This increase was driven by orders for gas purification systems and engineering service contracts received during the period.

Gross profit for the quarter ended March 31, 2005 was $1.2 million, compared to $0.3 million for the same period in 2004. As a percentage of total revenue, gross margin was 78% for the current quarter compared to 28% for the same period in 2004. Gross profit was $1.5 million for the half year ended March 31, 2005 compared to $0.4 million for same period ended March 31, 2004. As a percentage of total revenue, gross margin was 61% and 32% for the half years ended March 31, 2005 and March 31, 2004, respectively. The increases in margins for both the quarter and the half year ended March 31, 2005 compared to the same periods in 2004 were due to high margins realized on revenue from engineering service contracts recognized during the quarter ended March 31, 2005. Margins on gas purification systems sold during the quarter were in line with historical margins in the 30-40% range. It is expected that margins will fluctuate from quarter to quarter depending on the revenue mix from engineering service contracts and gas purification systems recognized during the quarter.

Sales and marketing expenses were $0.5 million for the quarter ended March 31, 2005, an increase of 25% compared to $0.4 million in the same period in 2004. For the half year ended March 31, 2005, sales and marketing expenses were $0.9 million, an increase of 24% compared to $0.8 million in the same period in 2004. The increases in sales and marketing expenses for both the quarter and the half year ended March 31, 2005 compared to the same periods in 2004 were attributed to increased salary expenses resulting from growth in the size of the sales group and to increased travel costs.

The gross research and development ("R&D") expenditures, offsetting government and development partner funding and the resulting net R&D expenditures for the relevant periods, were as follows:

The increases in R&D spending during both the quarter and half year ended March 31, 2005 compared to the same periods in 2004 were due to increased R&D expenditures related the program undertaken with EMRE to develop a large capacity gas purification system for use in oil refineries.

General and administrative expenses for the quarter ended March 31, 2005 were $0.8 million compared to $0.8 million for the same period in 2004. General and administrative expenses for the half year ended March 31, 2005 were $1.6 million compared to $1.4 million for the same period in 2004.

Gross capital expenditures for the quarter ended March 31, 2005 were $0.3 million, compared to $0.2 million for the same period of 2004. Capital expenditures were lower for the half year ended March 31, 2005 at $0.3 million, compared to capital expenditures of $0.6 million for the same period in 2004. Capital expenditures in the quarter ended March 31, 2005 related mainly to R&D and manufacturing equipment to support the development program being undertaken with EMRE. It is expected that capital expenditures will fluctuate from quarter to quarter depending on the requirements of specific product development programs and administrative needs.

Liquidity and Capital Resources

Cash and short term investments at March 31, 2005 were $14.3 million, a decrease of $3.3 million from December 31, 2004. On December 21, 2004 the Company completed an Initial Public Offering on the AIM market of the London Stock Exchange plc and the Toronto Stock Exchange, from which the Company received proceeds from the offering, net of offering costs, of $12.3 million. The Company is expecting to pay approximately $0.4 million in additional offering related expenses in the third quarter of fiscal 2005. Offering costs related to the IPO are recorded as an offset to common share capital.

Cash used by operations and capital requirements for the quarter ended March 31, 2005 was $2.7 million compared to $1.6 million in the same period in 2004. Cash used by operations and capital requirements for the half year ended March 31, 2005 was $4.7 million compared to $2.6 million for the same period in 2004. This increase in cash burn for the quarter and the half year compared to the same periods in 2004 related to changes in non-cash working capital requirements, and an investment in inventory related to a $2.2 million order for two test system received from EMRE during the quarter ended December 31, 2004. Based on the expected profile of product development and commercial activities over the remainder of the fiscal year, forecast cash burn for the remainder of fiscal 2005 is expected to be reduced relative to the cash burn for the fiscal year-to-date.

Subsequent to quarter end, on April 22, 2005 QuestAir secured a US$3 million ($3.7 million) credit facility from Comerica Bank. The credit facility is comprised of a US$1 million ($1.2 million) accounts receivable line of credit, and a US$2 million ($2.5 million) term loan. The Company expects to use the credit line for working capital requirements related to the sale of its commercial gas purification systems, whereas the term loan will principally be used to finance capital investments, including the manufacturing equipment required for QuestAir to bring its second generation gas purification systems to market.

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. At March 31, 2005, the Company had claimed $4.8 million against this loan.

As at March 31, 2005 QuestAir had 37,296,206 common shares issued and outstanding. In addition, the Company had 4,843,515 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.  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. There are no reconciling items in the consolidated statements of cash flows for the six months ended March 31, 2005 and 2004.

Consolidated Balance Sheet

Consolidated Statements of Operations and Deficit

a) Redeemable preferred shares reorganization

For the period from November 5, 2002 to July 1, 2003, the Class C preferred shares were accounted for as equity under U.S. GAAP. On July 1, 2003, the Company adopted the provisions of Statement of Financial Accounting Standards No. 150 (SFAS 150), which resulted in the Class C preferred shares being classified as a liability. The liability for the Class C preferred shares was reflected at its fair value of $5,665,358 and the resulting gain of $5,194,447 from the adoption of SFAS 150 has been recorded in shareholders' equity as contributed surplus. The Class A and B preferred shares are classified as equity for U.S. GAAP purposes.

At September 30, 2004, the liability has been recorded at its estimated fair value of $5,877,243 (2003 - $5,665,358), with the increase of $211,885 being recorded as an accretion charge in the consolidated statement of operations and deficit.

In December of 2004, the Company completed an initial public offering of its securities on the Toronto Stock Exchange and on the AIM Market of the London Stock Exchange Plc., consisting of a new issue of 8,600,000 Common Shares, for gross proceeds of $15,050,000.

Immediately prior to closing the initial public offering, the Company completed a reorganization of its share capital whereby the existing share classes were converted into a single class of common shares. To complete the share capital reorganization, certain terms of the Class A, B and C preferred shares relating to automatic conversion rights were modified to convert these shares into common shares. The modification of the share rights is accounted for on a fair value basis. The difference between the fair value of the preferred share rights prior to and subsequent to the modification is accounted for as an adjustment to shareholders' equity and to operations for U.S. GAAP purposes. The modification to the Class A and B preferred share rights resulted in an increase in deficit of $1,705,093 for both Canadian and U.S. GAAP purposes as these shares are classified as equity. However, the modification of the Class C preferred share rights resulted in a gain of $1,790,253 for U.S. GAAP purposes, as the Class C preferred shares were classified as a liability. Under Canadian GAAP, the modification of the Class C preferred shares was treated as contributed surplus. With respect to calculating loss per share for U.S. GAAP purposes, both the gain on the conversion of the Class C preferred shares and the charge related to the conversion of the Class A and B preferred shares were included in the computation of loss per share.

b) Stock-based compensation

Under Canadian GAAP, the Company adopted the fair value based method of accounting for stock based compensation, on a prospective basis, to account for all its awards of shares and share options that are granted, modified or settled on or after October 1, 2002. The Company also adopted, on a prospective basis, the fair value based method of accounting for stock-based compensation for U.S. GAAP purposes effective October 1, 2002. Prior to October 1, 2002, the Company used the intrinsic value based method to account for the above awards for U.S. GAAP.

Had the Company adopted the fair value based method under U.S. GAAP for the period prior to October 1, 2002, the Company's net loss and loss per share under U.S. GAAP would have been presented as follows:

In the calculation of the additional compensation expense above, the fair value of each share option grant was estimated on the date of the grant using the Black-Scholes option valuation model with the following assumptions:

Certain statements in this press release may constitute ''forward-looking'' statements which involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company, or industry results, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. When used in this press release, such statements use such words as "anticipate", "believe", "plan", "estimate", "expect", "intend", ''may'', ''will'' and other similar terminology. These statements reflect current expectations regarding future events and operating performance and speak only as of the date of this press release. Forward-looking statements involve significant risks and uncertainties, should not be read as guarantees of future performance or results, and will not necessarily be accurate indications of whether or not such results will be achieved. A number of factors could cause actual results to differ materially from the results discussed in the forward-looking statements.

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About QuestAir Technologies Inc.
QuestAir Technologies, Inc. is a developer and supplier of proprietary gas purification systems for several large international markets, including existing markets such as oil refining, biogas production and natural gas processing, and emerging markets such as fuel cell power plants and fuel cell vehicle refuelling stations. The Company has joint development agreements with Exxon Mobil Research and Engineering Company and Shell Hydrogen, and a collaboration with FuelCell Energy. QuestAir is based in Burnaby, British Columbia and its shares trade on the AIM Market of the London Stock Exchange Plc. and on the Toronto Stock Exchange under the symbol "QAR".

For further information please contact:

QuestAir Technologies Inc.
Andrew Hall
Director, Corporate Development and External Communications
Phone: (001) 604-453-6967
Email: hall@questairinc.com
Web: www.questairinc.com

UK media contact:
Charles Ryland
Ben Willey
Eleanor Williamson
Buchanan Communications
Phone: 020 7466 5000

Canadian media contact:
Pam Smith
James Hoggan + Associates
Phone: (001) 604-739-7500

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