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
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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)
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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)
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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) -
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(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
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(24,627) (21,143)
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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/