Press Release
QSound Labs Reports Second Quarter Results for 2002
CALGARY, CANADA - August 13, 2002 - 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, 2002 of $870,000 as
compared to $821,000 for the same period in FY2001. The operating profit
for the quarter was $188,000 or $0.03 per share as compared to $59,000 or
$0.01 per share for the same period last year. Including non-cash items
such as depreciation and amortization of goodwill, net income for the
period was $84,000 or $0.01 per share as compared to a loss of $(160,000)
or $(0.02) per share for the same period in FY2001.
Revenues for the six months June 30, 2002 were $1,625,000 compared to
$1,664,000 for the same period in FY2001. The operating profit was
$356,000 or $0.05 per share in FY2002 and $91,000 or $0.01 per share in
FY2001. Net income for the six month period in FY2002 was $173,000 or
$0.02 per share in FY2002 as compared to a loss of $(339,000) or $(0.05)
per share in FY2001.
The Company reported a working capital surplus of $2,518,000 compared to
$2,288,000 as at December 31, 2001. The Company continues to generate cash
flow from operations and as at June 30, 2002 had cash and cash equivalents
of $1,609,000 on hand.
"In line with guidance provided three months ago, the Company produced
similar results to the first quarter," stated David Gallagher, President
and CEO of QSound Labs. "In the latest quarter, royalties received from
our hearing aid license continued to be strong and iQfx(R)3 sales picked
up in June as RealNetworks returned to a more aggressive marketing
strategy."
"We expect royalties from Philips to be more material in the second half
of this year, although the third quarter will likely produce similar
results to the previous two. Our cost containment program continues to be
effective as operating expenses are down 21% in FY2002 versus FY2001. Both
our business units continue to be self-sustaining and we are endeavoring
to build upon this platform by developing new audio and voice solutions
for higher growth markets."
"As outlined in the recent presentation to the shareholders at the AGM,
the Company is focussing most of its development resources on complete
software solutions for audio and voice applications. To complement these
activities, QSound has entered into a strategic relationship with a
private corporation that provides cost saving network solutions for the
small and medium enterprise telephony market. The companies intend to work
together by leveraging their software development expertise to co-develop
software applications for the converging telephony and network industries.
As a part of this co-operation, QSound has advanced funds totaling
$350,000 as at June 30, 2002 and are secured by the assets of the private
company."
This release contains
forward-looking statements within the meaning of the Private Securities
Litigation Act of 1995 concerning, among other things, expectation of
increasing royalties from existing licensees including Philips, continued
self-sustainment from QSound's audio and e-commerce businesses, and
QSound's business relationship with a private company including planned
development and commercial introduction of new products for telephony and
networking industries. Investors are cautioned that such forward-looking
statements involve risk and uncertainties, which could cause actual
results, performance or achievements of QSound, 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 loss of relationships with companies that do business with
QSound, successful product development, introduction and acceptance,
QSound's ability to carry out its business strategy and marketing plans,
including availability of sufficient resources to do so timely and cost
effectively, dependence on intellectual property, rapid technological
change, competition, general economic and business conditions, continued
growth of the Internet and other risks detailed from time to time in
QSound's periodic reports filed with the Securities and Exchange
Commission. Forward-looking statements are based on the current
expectations, projections and opinions of QSound's management, and QSound
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 June 30, 2002 and December 31, 2001
(Expressed in United States dollars, prepared using US GAAP)
June 30, 2002 December 31, 2001
(unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 1,608,949 $ 2,047,892
Accounts receivable 654,537 439,245
Note receivable 350,000 -
Inventory 27,980 28,587
Deposits and prepaid
expenses 113,396 85,365
----------------------------------------------------------------------
2,754,862 2,601,089
Capital assets 892,322 932,776
Intangible assets 2,415,192 2,432,142
----------------------------------------------------------------------
$ 6,062,376 $ 5,966,007
----------------------------------------------------------------------
LIABILITIES AND
SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable and
accrued Liabilities $ 205,524 $ 304,726
Deferred Revenue 31,215 8,282
----------------------------------------------------------------------
236,739 313,008
Shareholders' equity:
Share capital (7,085,574
common shares) 43,939,684 43,939,684
Contributed Surplus 1,114,316 1,114,316
Deficit (39,228,363) (39,401,001)
----------------------------------------------------------------------
5,825,637 5,652,999
----------------------------------------------------------------------
$ 6,062,376 $ 5,966,007
----------------------------------------------------------------------
QSound Labs, Inc.
Consolidated Statements of Operations and Deficit
For the periods Ended June 30, 2002 and 2001
(Expressed in United States dollars, prepared using US GAAP)
For three For three For six For six
months months months months
ended ended ended ended
June 30, June 30, June 30, June 30,
2002 2001 2002 2001
(unaudited)(unaudited)(unaudited)(unaudited)
REVENUE
Royalties, license fees
and product sales $ 870,165 $ 821,451 $1,625,327 $1,663,992
Cost of product sales 49,365 11,903 58,636 36,329
----------------------------------------------------------------------
820,800 809,548 1,566,691 1,627,663
EXPENSES:
Marketing 259,116 339,337 453,132 579,252
Operations 62,102 43,198 143,634 182,359
Product engineering 160,157 219,057 340,717 470,837
Administration 151,540 149,268 273,134 303,861
----------------------------------------------------------------------
632,915 750,860 1,210,617 1,536,309
----------------------------------------------------------------------
Operating profit 187,885 58,688 356,074 91,354
Other items
Depreciation and
amortization (91,010) (234,063) (171,047) (468,317)
Gain on sale of capital
assets 29 6,515 29 6,515
Other (12,615) 8,641 (12,418) 31,159
----------------------------------------------------------------------
(103,596) (218,907) (183,436) (430,643)
----------------------------------------------------------------------
Net income (loss) for the
period 84,289 (160,219) 172,638 (339,289)
Deficit beginning of
period (39,312,652) (39,401,001)
(38,847,161) (38,668,091)
----------------------------------------------------------------------
Deficit end of period $(39,228,363) $(39,228,363)
$(39,007,380) $(39,007,380)
----------------------------------------------------------------------
Income (loss) per
common share $ 0.01 $ (0.02) $ 0.02 $ (0.05)
----------------------------------------------------------------------
QSound Labs, Inc.
Consolidated Statements of Cash Flow
For the periods Ended June 30, 2002 and 2001
(Expressed in United States dollars, prepared using US GAAP)
For three For three For six For six
months months months months
ended ended ended ended
June 30, June 30, June 30, June 30,
2002 2001 2002 2001
(unaudited)(unaudited)(unaudited)(unaudited)
OPERATIONS
Income (loss) for the
period $ 84,289 $ (160,219) $ 172,638 $ (339,289)
Items not requiring
(providing) cash:
Depreciation and
amortization 91,010 234,063 171,047 468,317
Gain on sale of capital
assets (29) (6,515) (29) (6,515)
Changes in working capital
balances (80,174) (106,539) (318,985) 55,899
----------------------------------------------------------------------
95,096 (39,210) 24,671 178,412
----------------------------------------------------------------------
FINANCING
Repurchase of common
shares, net - (82,822) - (293,739)
Repayment of debt - (275,000) - (550,000)
----------------------------------------------------------------------
- (357,822) - (843,739)
----------------------------------------------------------------------
INVESTMENTS
Purchase of capital assets (29,336) (20,590) (97,487) (36,064)
Purchase of intangible
assets (11,155) - (16,156) (9,153)
Change in working capital
for investment purposes (350,000) - (350,000) -
Proceeds from sale of
capital assets 29 6,515 29 6,515
----------------------------------------------------------------------
(390,462) (14,075) (463,614) (38,702)
----------------------------------------------------------------------
Increase (decrease) in
cash (295,366) (411,107) (438,943) (704,029)
Cash and cash equivalents
beginning of period 1,904,315 1,971,717 2,047,892 2,264,639
----------------------------------------------------------------------
Cash and cash
equivalents
end of period $ 1,608,949 $ 1,608,949
$ 1,560,610 $ 1,560,610
----------------------------------------------------------------------
/T/