Press Release

 

 

QSound Labs Reports First Quarter Results for 2001

 

 

CALGARY, Alberta - May 10, 2001 - QSound Labs, Inc. (NASDAQ: QSND) a leading developer of audio, e-commerce and multimedia software products, reported revenues for the three months ended March 31, 2001 of $842,541 as compared to $835,351 for the same period in FY2000. The operating profit for the quarter was $32,666 or $0.01 as compared to an operating loss of $(270,791) or $(0.01) for the same period last year. Including depreciation and amortization of goodwill, the net loss for the period was $(179,070) or $(0.01) per share as compared to $(519,586) or $(0.02) for the same period in FY2000.

The Company reported working capital of $2.6 million, which included short-term debt of $275,000. This amount was repaid subsequent to the quarter ending, leaving the Company with no debt at this time. To date during FY2001, the Company has repurchased for cancellation 151,400 of its common shares at a cost of $93,740.

"The financial results were generally in line with management's expectations," stated David Gallagher, President and CEO of QSound Labs. "We are still comfortable with the guidance given on our last earnings release. Although we did suffer some timing setbacks on revenue during this quarter, we expect those shortfalls to correct themselves in subsequent quarters."

As previously reported, the Company received a Nasdaq Staff Determination Notice on April 17, 2001, indicating that the Company had failed to comply with the minimum bid requirement for continued listing on the Nasdaq SmallCap Market as set forth in Marketplace Rule 4310 (c)(4). The Company has a hearing before a NASDAQ Panel scheduled for June 7, 2001. There can be no assurances that the Panel will grant QSound's request for continued listing on the Nasdaq SmallCap Market, and if the request is denied, the Company anticipates that its securities will be traded on the NASD OTC Bulletin Board.

The OTCBB is a controlled quotation service that offers real-time quotes, last-sale prices and volume information in over-the-counter equities.

Outlook
The Company is still forecasting a 25% growth in FY2001 revenue for the audio business segment. Both OEM and downloadable software distribution activities are expected to contribute to this growth.

For QCommerce, the focus is on building a recurring subscription-based revenue model. In FY2000, the majority of the revenue earned was from lump sum contracts. As previously reported, the Company does not expect significant overall growth during FY2001 but does expect the e-Commerce business segment to break even on the year.

Operating costs and non-cash charges such as depreciation and amortization incurred in the first quarter are indicative of the run-rate for the remainder of the year.

First Quarter Review

During the first quarter, the Company's audio division signed agreements with:

 

  • InterVideo, a leading provider of PC video software, to offer QSound's QSurround™ technology as an option in InterVideo's WinDVD product to its OEM customers. WinDVD is a software-only DVD player for personal computers. The first OEM to incorporate the QSound-enhanced DVD software into their computer lines was Fujitsu.

  • MUSICMATCH to offer a co-branded version of its QMax™ audio effects software to its 15 million MUSICMATCH Jukebox® users worldwide via the "Get Gear" section at musicmatch.com and through other marketing initiatives. QMax is based on QHD™, QSound's "High Definition Audio for the Internet", an industry-leading suite of audio tools designed specifically to enhance and improve Internet audio.

  • Cirrus Logic to feature QSound's headphone technology in its new Maverick line of embedded processors. Maverick semiconductors were the leading Internet audio chips in 2000 and run a wide variety of Internet entertainment devices.

 

Following on from the restructuring carried out in FY 2000, QCommerce continued to rationalize its cost base in relation to its revenue levels. All of the revenue earned during the first quarter was generated from a subscription-based model. For the remainder of the year, operations costs will decrease by approximately 50% due to a change in suppliers made during the first quarter.



This release contains forward-looking statements within the meaning of the Private Securities Litigation Act of 1995 concerning, among other things, future financial results. Investors are cautioned that such forward-looking statements involve risk and uncertainties, which could cause actual results, performance or achievements of the Company, or industry results to differ materially from those reflected in the forward-looking statements. Such risks and uncertainties include, but are not limited to, risks associated with the Company's ability to carry out its business strategy and marketing plans, including availability of sufficient resources for the Company to do so timely and cost effectively, commercialization of the Company's technologies, consumer acceptance of the Company's products and services, dependence on the performance of third parties who have licensed the Company's technologies, dependence on intellectual property, uncertainties relating to product development and commercial introduction, rapid technological change and competition, manufacturing uncertainties and other risks detailed from time to time in the Company's periodic reports filed with the Securities and Exchange Commission. Forward-looking statements are based on the current expectations, projections and opinions of the Company's management, and the Company undertakes no obligation to publicly release the results of any revisions to such forward-looking statements which may be made, for example to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.

 

 

/T/

QSound Labs, Inc.
Consolidated Balance Sheets
As at March 31, 2001 and December 31, 2000
(Expressed in United States dollars)

                                 March 31, 2001  December 31, 2000
ASSETS
Current assets:
  Cash and cash equivalents     $     2,099,765  $       2,264,639
  Accounts receivable                   949,222          1,166,941
  Inventory                              48,087             48,431
  Deposits and prepaid expenses         179,668            108,752
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                                      3,276,742          3,588,763


Investments                              60,762             42,557
CAPITAL ASSETS                        1,009,533          1,071,618
INTANGIBLE ASSETS                     2,726,404          2,873,946
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                                $     7,073,441  $       7,576,884
------------------------------------------------------------------
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabiltiies:
  Accounts payable and accrued
   Liabiltiies                  $       362,132  $         352,865
  Consideration payable on
   Acquisition                          275,000            550,000
  Deferred Revenue                       15,277              9,253
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                                        652,409            912,118
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Shareholders' equity
Share capital 
 (29,175,657 common shares)          45,268,235         45,479,152
Contributed Surplus                     133,696              5,648
Deficit                             (38,847,161)       (38,668,091)
Accumulated other comprehensive income (133,738)          (151,943)
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                                      6,421,032          6,664,766
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                                $     7,073,441  $       7,576,884
------------------------------------------------------------------
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QSound Labs, Inc.
Consolidated Statements of Operations and Deficit
For the Three Month Periods Ended March 31, 2001 and 2000
(Expressed in United States dollars)

                                 March 31, 2001     March 31, 2000

REVENUE
  Royalties, license fees and
   product sales                $       842,541  $         835,351
  Cost of product sales                  24,426             52,748
------------------------------------------------------------------
                                        818,115            782,603
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EXPENSES:
  Marketing                             239,915            342,791
  Operations                            139,161                  -
  Product engineering                   251,780            505,028
  Administration                        154,593            205,575
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                                        785,449          1,053,394
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OPERATING PROFIT (LOSS)                  32,666           (270,791)

OTHER ITEMS
  Depreciation and amortization        (234,254)          (268,443)
  Other                                  22,518             19,648
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NET INCOME (LOSS) FOR PERIOD           (179,070)          (519,586)

DEFICIT BEGINNING OF PERIOD         (38,668,091)       (30,861,059)
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DEFICIT END OF PERIOD           $   (38,847,161) $     (31,380,645)
-------------------------------------------------------------------
-------------------------------------------------------------------

INCOME (LOSS) PER COMMON SHARE  $        (0.006) $          (0.019)
-------------------------------------------------------------------
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QSound Labs, Inc.
Consolidated Statements of Cash Flows
For the Three Month Periods Ended March 31, 2001 and 2000
(Expressed in United States dollars)


                                 March 31, 2001     March 31, 2000

Cash provided by (used in)

OPERATIONS
  Income (loss) for the period  $      (179,070)  $       (519,586)
  Items not requiring (providing)
   cash:
   Depreciation and amortization        234,254            268,443
   Gain on sale of capital assets             -               (120)
  Changes in working capital balances   162,438           (237,879)
------------------------------------------------------------------
                                        217,622           (489,142)
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FINANCING
  Issuance of common shares, net              -          2,755,202
  Repurchase of common shares, net      (82,869)                 -
  Repayment of debt                    (275,000)                 -
------------------------------------------------------------------
                                       (357,869)         2,755,202
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INVESTMENTS
  Purchase of capital assets            (15,474)           (16,300)
  Purchase of intangible assets          (9,153)            (4,963)
  Proceeds from sale of capital assets        -                120
------------------------------------------------------------------
                                        (24,627)           (21,143)
------------------------------------------------------------------

Increase (decrease) in cash            (164,874)         2,244,917
Cash and cash equivalents beginning of
 period                               2,264,639          1,524,363
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Cash and cash equivalents end
 of period                    $       2,099,765   $      3,769,280
------------------------------------------------------------------
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/T/

 

 

 

 

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