Press Release
QSound Labs Reports First Quarter Results for 2003
Calgary, Alberta-May 12, 2003 -- 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, 2003 of $831,000 as compared to $755,000 for the same period in FY2002. The
operating profit for the quarter was $178,000 or $0.02 per share as compared to $168,000 or
$0.02 per share for the same period last year. Including non-cash items such as depreciation,
net income for the period was $88,000 or $0.01 per share as compared to $88,000 or $0.01 per
share for the same period in FY2002.
The Company reported a working capital surplus of $3,423,000 compared to $3,284,000 as at
December 31, 2002. During the quarter, cash and cash equivalents increased from $2,621,000 to
$2,870,000.
"For the most part, the quarter's financial performance was as expected," stated David
Gallagher, President and CEO of QSound Labs. "Royalties from consumer electronics and PC
audio licensees were lower than expected, resulting in a slightly lower than expected net income.
Revenues from RealNetworks sales of iQfx®3 remained steady. The North American portion of our
license with Starkey Labs expired at the end of February so royalties were lower than the
previous quarter."
"During the quarter, we announced microQ, an audio software solution for the mobile and
handheld device markets. Marketing efforts for the balance of the year will be directed at
gaining design wins for this product."
"In the short term, our financial results will reflect the recent license expiration, but
management expects this revenue to be replaced during the balance of this year, as new licenses
and products come to market."
"Subsequent to the quarter ending, the Company acquired all of the assets of a private
corporation, in which it had previously held an investment. As at March 31, this investment
totaled $525,000 and this was the consideration for the purchase. The assets consist primarily
of software for Internet Telephony applications. Management expects to provide updates regarding
this opportunity in the very near future."
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 March 31, 2003 and December 31, 2002
(Expressed in United States dollars, prepared using US GAAP)
March 31, 2003 December 31, 2002
(unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 2,869,954 $ 2,621,205
Accounts receivable 709,626 929,519
Inventory 32,765 16,455
Deposits and prepaid
expenses 61,991 58,674
----------------------------------------------------------------------
3,674,336 3,625,853
Note Receivable 525,000 500,000
Capital assets 796,577 747,553
Goodwill 2,184,589 2,184,589
Intangible assets 205,530 213,771
----------------------------------------------------------------------
$ 7,386,032 $ 7,271,766
----------------------------------------------------------------------
LIABILITIES AND
SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable and
accrued Liabilities $ 137,955 $ 220,894
Deferred Revenue 113,277 120,511
----------------------------------------------------------------------
251,232 341,405
Shareholders' equity:
Share capital (7,159,074
common shares) 44,204,092 44,088,094
Contributed Surplus 1,114,316 1,114,316
Deficit (38,183,608) (38,272,049)
----------------------------------------------------------------------
7,134,800 6,930,361
----------------------------------------------------------------------
$ 7,386,032 $ 7,271,766
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QSound Labs, Inc.
Consolidated Statements of Operations and Deficit
For the three month periods ended March 31, 2003 and 2002
(Expressed in United States dollars, prepared using US GAAP)
2003 2002
(unaudited) (unaudited)
REVENUE
Royalties and license fees $ 480,655 $ 420,516
Product Sales 350,195 334,646
----------------------------------------------------------------------
830,850 830,850
Cost of product sales 82,737 9,271
----------------------------------------------------------------------
748,113 745,891
EXPENSES:
Marketing 256,798 194,016
Operations 36,069 81,532
Product engineering 180,560 251,780
Administration 151,654 180,560
----------------------------------------------------------------------
569,733 577,702
----------------------------------------------------------------------
Operating profit 178,380 168,189
Other items
Depreciation and amortization (80,265) (80,037)
Interest and other income 5,931 -
Other (15,605) 197
----------------------------------------------------------------------
(89,939) (79,840)
----------------------------------------------------------------------
Net income (loss) for the
period 88,441 88,349
Deficit beginning of period (38,272,049) (39,198,943)
----------------------------------------------------------------------
Deficit end of period $ (38,183,608) (39,110,594)
----------------------------------------------------------------------
Income (loss) per common
share $ 0.01 $ 0.01
----------------------------------------------------------------------
QSound Labs, Inc.
Consolidated Statements of Cash Flows
For the three month periods ended March 31, 2003 and 2002
(Expressed in United States dollars, prepared using US GAAP)
2003 2002
(unaudited) (unaudited)
Cash provided by (used in)
OPERATIONS
Income (loss) for the
period $ 88,441 $ 88,349
Items not requiring
(providing) cash:
Depreciation and
amortization 80,265 80,037
Changes in working capital
balances 85,093 (238,811)
----------------------------------------------------------------------
253,799 (70,425)
----------------------------------------------------------------------
FINANCING
Issuance of common shares,
net 1,410 -
----------------------------------------------------------------------
1,410 -
----------------------------------------------------------------------
INVESTMENTS
Purchase of capital assets (844) (73,152)
Purchase of intangible
assets (11,480) -
----------------------------------------------------------------------
(12,324) (73,152)
----------------------------------------------------------------------
Increase (decrease) in cash 242,885 (143,577)
Cash and cash equivalents
beginning of period 2,621,205 2,047,892
----------------------------------------------------------------------
Cash and cash equivalents
end of period $ 2,864,090 $ 1,904,315
----------------------------------------------------------------------
/T/