Press Release
QSound Labs Reports Second Quarter Results for 2001
Calgary, Alberta-August 9, 2001 - QSound Labs, Inc.
(NASDAQ: QSND) a leading developer of audio, e-commerce and multimedia
software products, reported revenues for the three months ended June 30,
2001 of $821,000 as compared to $1,199,000 for the same period in FY2000.
The operating profit for the quarter was $59,000 or $0.01 per share as
compared to $102,000 or $0.01 per share for the same period last year.
Including non-cash items such as depreciation and amortization of
goodwill, the net loss for the period was $(160,000) or $(0.02) per share
as compared to $(1,099,000) or $(0.10) per share for the same period in
FY2000.
Revenues for the six months ended June 30, 2001 were $1,664,000 compared
to $2,034,000 for the same period in 2000. The operating profit for the
same period was $91,000 or $0.01 per share as compared to a loss of
$(169,000) or $(0.02) for in FY2000. Net loss for the six month period was
$(339,000) or $(0.05) per share in 2001 and $(1,618,000) or $(0.18) per
share in 2000.
The Company reported a working capital surplus of $2.5 million and
continues to generate positive cash flow from operations. During this
fiscal year, the Company has used $844,000 of its cash surplus to retire
all of its debt and to repurchase and cancel 162,850 common shares of the
Company.
"Although the economic slowdown has affected our revenues, the Company
still continues to operate as a positive cash flow entity," stated David
Gallagher, President and CEO of QSound Labs. "The majority of our audio
technology licensees and partners experienced shipment reductions in the
second quarter and this translated into 14% revenue reduction for the
audio business as compared to the previous quarter. Our recurring revenue
base for our e-commerce business grew by 12% over the same time period. In
the previous year, e-commerce revenues included lump sum license fees that
were non-recurring: the second quarter for FY2000 included $300,000 of
such revenues."
"Despite the fact that the economic slowdown has affected most of our
target markets in FY 2001, the Company is confident that its goal of
achieving profitability by year end is still attainable. QSound is
committed to supporting its audio business partners, who include Philips,
Real Networks, Mitsubishi, Zoran, InterVideo and Cirrus through continued
product development and support. The e-commerce business unit is equally
committed to the continued support of its merchant base hosted on
ChoiceWorld.com, ChoiceMall.com and InetMall.com."
Subsequent to the end of the second quarter, the Company was notified by
NASDAQ that it has evidenced compliance with the requirements necessary
for continued listing on the NASDAQ SmallCap Market, that the Company will
remain listed on the NASDAQ SmallCap Market and that the hearing file has
been closed. This followed a 1 for 4 stock consolidation effected by the
Company on July 9, 2001.
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.
QSound Labs, Inc.
Consolidated Balance Sheets
As at June 30 2001 and December 31, 2000
(Expressed in United States dollars)
June 30, 2001 December 31, 2000
(unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 1,560,610 $ 2,264,639
Accounts receivable 955,580 1,166,941
Inventory 47,846 48,431
Deposits and prepaid expenses 152,255 108,752
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2,716,291 3,588,763
INVESTMENTS 15,560 42,557
CAPITAL ASSETS 934,543 1,071,618
INTANGIBLE ASSETS 2,587,921 2,873,946
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$ 6,254,315 $ 7,576,884
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabiltiies:
Accounts payable and
accrued Liabiltiies $ 233,638 $ 352,865
Consideration payable on Acquisition - 550,000
Deferred Revenue 15,936 9,253
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249,574 912,118
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Shareholders' equity
Share capital (29,400,657
common shares) 44,433,556 45,479,152
Contributed Surplus 757,505 5,648
Deficit (39,007,380) (38,668,091)
Accumulated other comprehensive income (178,940) (151,943)
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6,004,741 6,664,766
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$ 6,254,315 $ 7,576,884
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QSound Labs, Inc.
Consolidated Statements of Operations and Deficit
For the Periods Ended June 30, 2001 and 2000
(Expressed in United States dollars)
For three months ended For six months ended
June 30, June 30, June 30, June 30,
2001 2000 2001 2000
(unaudited) (unaudited) (unaudited) (unaudited)
REVENUE
Royalties,
license fees
and product
sales $ 821,451 $ 1,198,920 $ 1,663,992 $ 2,034,271
Cost of product
sales 11,903 24,787 36,329 77,535
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809,548 1,174,133 1,627,663 1,956,736
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EXPENSES:
Marketing 339,338 340,595 579,252 683,386
Operations 43,198 75,000 182,359 75,000
Product engineering 219,057 451,767 470,836 956,795
Administration 149,268 204,515 303,861 410,090
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750,860 1,071,877 1,536,308 2,125,271
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OPERATING PROFIT
(LOSS) 58,688 102,256 91,355 (168,535)
OTHER ITEMS
Depreciation and
amortization (234,063) (403,097) (468,317) (671,540)
Write-off of
acquired
in-process
research and
development - (446,639) - (446,639)
Write-down of
investments - (250,000) - (250,000)
Other 15,156 (101,208) 37,674 (81,560)
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NET INCOME (LOSS)
FOR PERIOD (160,219) (1,098,688) (339,289) (1,618,274)
DEFICIT BEGINNING
OF PERIOD (38,847,161) (31,380,645) (38,668,091) (30,861,059)
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DEFICIT END
OF PERIOD $(39,007,380)$(32,479,333)$(39,007,380) $(32,479,333)
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INCOME (LOSS)
PER COMMON
SHARE $ (0.02)$ (0.10)$ (0.05)$ (0.18)
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QSound Labs, Inc.
Consolidated Statements of Cash Flows
For the Periods Ended June 30, 2001 and 2000
(Expressed in United States dollars)
For three months ended For six months ended
June 30, June 30, June 30, June 30,
2001 2000 2001 2000
(unaudited) (unaudited) (unaudited) (unaudited)
Cash provided by (used in)
OPERATIONS
Income (loss)
for the
period $ (160,219)$ (1,098,688)$ (339,289)$ (1,618,274)
Items not
requiring
(providing)
cash:
Depreciation
and
amortization 234,063 403,097 468,317 671,540
Gain on sale of
capital assets - - - (120)
Write-off of
acquired
in-process
research and
development - 446,639 - 446,639
Write-down of
investments - 250,000 - 250,000
Changes in working
capital balances (106,539) 1,474,443 55,899 1,236,564
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(32,695) 1,475,491 184,927 986,349
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FINANCING
Issuance of common
shares, net - (14,791) - 2,740,411
Repurchase of
common shares,
net (82,822) - (293,739) -
Increase in debt - 1,500,000 - 1,500,000
Repayment of debt (275,000) - (550,000) -
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(357,822) 1,485,209 (843,739) 4,240,411
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INVESTMENTS
Purchase of
capital assets (20,590) (434,571) (36,064) (450,871)
Purchase of
intangible assets (0) (3,053,004) (9,153) (3,057,967)
Proceeds from sale
of capital assets - - - 120
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(20,590) (3,487,575) (45,217) (3,508,718)
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Increase (decrease)
in cash (411,107) (526,875) (704,029) 1,718,042
Cash and cash
equivalents
beginning of
period 1,971,717 3,769,280 2,264,639 1,524,363
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Cash and cash
equivalents
end of period $ 1,560,610 $ 3,242,405 $ 1,560,610 $ 3,242,405
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