Press Release
QSound Labs Reports Fourth Quarter & Year End Results for 2003
Calgary, Alberta - March 24, 2004 -- QSound Labs,
Inc. (NASDAQ: QSND), a leading developer of audio and voice software products,
reported revenues for the three months ended December 31, 2003 of $363,000
as compared to $1,290,000 for the same period in FY2002. The operating
loss for the quarter was $(666,000) or $(0.09) per share as compared to
an operating profit of $680,000 or $0.10 per share for the same period
last year. After allowing for non-cash items such as depreciation and
asset impairment charges, the net loss for the period was $(3,003,000)
or $(0.42) per share as compared to net income of $453,000 or $0.06 per
share for the same period in FY2002.
Revenues for the year ended December 31, 2003 were $2,043,000 compared
to $4,224,000 in FY2002. The operating loss was $(1,271,000) or $(0.17)
per share in FY2003 and the operating profit was $1,672,000 or $0.23 per
share in FY2002. Net loss for FY2003 was $(3,706,000) or $(0.52) per share
as compared to net income of $1,129,000 or $0.16 per share in FY2002.
The Company reported a working capital surplus of $2,143,000 at December
31, 2003 of which cash comprised $2,061,000.
The asset impairment charge related primarily to the QCommerce business unit and represented a reduction in Goodwill previously capitalized when the Company acquired certain e-commerce businesses for equity in the late nineties. It has no cash effect on these or future financial statements.
“2003 was a year of transition. Management focused all of its efforts on introducing a new generation of audio solutions to the mobile & PC markets as well as gaining a foothold in the emerging VoIP market,” stated David Gallagher, President of QSound Labs. “Each of these initiatives represent a tremendous opportunity for the Company to participate in growth opportunities, as detailed below.”
Mobile Market
The Company introduced microQ in 2003 and by year-end had gained it’s
first design win, MiTAC’s Mio 8390, which began shipping in early 2004.
Also, by year-end, the Company had established relationships with two
semiconductor companies, one as a microQ licensee and the other as a co-marketing
agreement. 2004 will produce the first revenues from the microQ product
line and management expects to complete several more contracts for design
wins in early 2004. The industry outlook is exceptionally promising as
these devices become “smarter”, the demand for microQ-type solutions will
increase.
PC Market
The Company has a long established relationship with Philips and during
2003 continued to develop products for their distribution channels, specifically
the Aurilium, an award winning external USB sound card . To date, this
relationship has not returned material revenues but 2004 promises to improve
upon the past. There are opportunities to bundle our QVE based products
with other Philip’s products, as evidenced by the recently announced bundle
of USB powered speakers and Sound Agent 2, as well as opportunities to
expand the distribution of the sound card product line. The overall industry
outlook does not promise growth but the Company is well positioned since
there is less competition to deal with in this market.
VoIP Market
The Company’s focus in this market has been to identify niche opportunities
that limit competition with the major industry players. To that extent,
the focus has been on developing and marketing solutions to the small
business segment. Initially this has been low-density gateways and IP
phones that provide solutions for this segment. In 2004, the maturation
of the industry will require new products and solutions and the Company
plans to augment its current product line to meet these needs.
Again, the industry outlook is promising as VoIP technology acceptance rate has increased dramatically in the past twelve months.
Consumer Electronics Market
This is the most competitive market for the Company. The Company continues
to license technology to Toshiba, Sanyo, InterVideo & a number of
large Chinese OEMs and plans to add to this list in 2004.
E-Commerce
QCommerce revenues have declined over the past few years and for the future,
no organic growth is expected. The Company has therefore taken a reduction
in the related Goodwill asset, previously capitalized when the Company
acquired certain e-commerce businesses for equity.
This release contains forward-looking
statements within the meaning of the Private Securities Litigation Act
of 1995 concerning, among other things, expectation of revenues from existing
and new microQ licensees, product distribution through Philips, sales
of existing and new IP telephony products, and ongoing licensing activities
for QSound technologies. 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, continued
growth of mobile devices and Internet telephony products, successful product
development, introduction and acceptance, QSound's ability to carry out
its business strategy and marketing plans, dependence on intellectual
property, rapid technological change, competition, general economic and
business conditions, 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 December 31, 2003 and December 31, 2002
(Expressed in United States dollars, prepared using US GAAP)
December 31, December 31,
2003 2002
(unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 2,061,093 $ 2,621,205
Accounts receivable 221,194 929,519
Inventory 107,377 16,455
Deposits and prepaid expenses 82,921 58,674
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2,472,585 3,625,853
Note receivable - 500,000
Capital assets 1,114,992 747,553
Goodwill - 2,184,589
Intangible assets 189,002 213,771
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$ 3,776,579 $ 7,271,766
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable and accrued liabilities $ 233,198 $ 220,894
Deferred revenue 96,547 120,511
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329,745 341,405
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Shareholders' equity:
Share capital (7,195,244 common shares) 44,310,198 44,088,094
Contributed surplus 1,114,316 1,114,316
Deficit (41,977,680) (38,272,049)
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3,446,834 6,930,361
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$ 3,776,579 $ 7,271,766
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QSound Labs, Inc.
Consolidated Statements of Operations and Deficit
For the periods ended December 31, 2003 and 2002
(Expressed in United States dollars, prepared using US GAAP)
For three For three For the For the
months ended months ended year ended year ended
December 31, December 31, December 31, December 31,
2003 2002 2003 2002
(unaudited) (unaudited) (unaudited) (unaudited)
REVENUE
Royalties and
license fees $ 88,109 $ 919,806 $ 779,396 $ 2,810,717
Product sales 275,154 370,451 1,263,692 1,413,594
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363,263 1,290,257 2,043,088 4,224,311
Cost of
product sales 136,075 79,210 419,837 271,530
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227,188 1,211,047 1,623,251 3,952,781
EXPENSES:
Marketing 435,094 225,554 1,301,890 895,820
Operations 52,637 42,498 174,558 235,201
Product
engineering 235,630 138,503 834,333 643,524
Administration 169,573 124,154 583,763 506,028
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892,934 530,709 2,894,544 2,280,573
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OPERATING
(LOSS) PROFIT (665,746) 680,338 (1,271,293) 1,672,208
OTHER ITEMS
Depreciation
and
amortization (71,089) (75,866) (308,717) (382,662)
Impairment of
assets (2,292,742) (100,000) (2,292,742) (100,000)
Funding of
past service
pension costs - (55,189) - (55,189)
Interest and
other income 7,011 10,535 41,164 29,833
Gain (loss) on
sale of
capital
assets 3,933 59 2,204 740
Other 15,560 (7,120) 123,753 (35,979)
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(2,337,327) (227,581) (2,434,338) (543,257)
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NET (LOSS)
INCOME FOR
PERIOD (3,003,073) 452,757 (3,705,631) 1,128,951
DEFICIT
BEGINNING OF
PERIOD (38,974,607) (38,724,807) (38,272,049) (39,401,001)
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DEFICIT END
OF PERIOD $(41,977,680) $(38,272,050) $(41,977,680) $(38,272,050)
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INCOME PER
COMMON SHARE $ (0.42) $ 0.06 $ (0.52) $ 0.16
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QSound Labs, Inc.
Consolidated Statements of Cash Flows
For the periods ended December 31, 2003 and 2002
(Expressed in United States dollars, prepared using US GAAP)
For three For three For the For the
months ended months ended year ended year ended
December 31, December 31, December 31, December 31,
2003 2002 2003 2002
(unaudited) (unaudited) (unaudited) (unaudited)
Cash provided
by (used in)
OPERATIONS
(Loss) income
for the
period $(3,003,073) $ 452,757 $(3,705,631) $ 1,128,951
Items not
requiring
(providing)
cash:
Depreciation
and
amortization 71,089 175,866 308,717 482,662
Impairment of
assets 2,292,742 - 2,292,742
Compensation
cost of
options
issued to
non-
employees 84,575 - 90,439 -
Loss (gain)
on sale of
capital
assets (3,933) (59) (2,204) (740)
Changes in
working
capital
balances 181,708 340,081 576,244 (423,054)
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(376,892) 968,645 (439,693) 1,187,819
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FINANCING
Issuance of
common
shares, net 11,298 39,685 22,940 39,685
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11,298 39,685 22,940 39,685
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INVESTMENTS
Purchase of
capital
assets (46,807) (2,595) (98,026) (113,879)
Purchase of
intangible
assets (15,215) (17,091) (51,394) (41,052)
Change in
working
capital for
investment
purposes - - - (500,000)
Proceeds from
sale of
capital
assets 260 59 6,061 740
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(61,762) (19,627) (143,359) (654,191)
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Increase
(decrease) in
cash (427,356) 988,703 (560,112) 573,313
Cash and cash
equivalents
beginning of
period 2,488,449 1,632,502 2,621,205 2,047,892
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Cash and cash
equivalents
end of period $ 2,061,093 $ 2,621,205 $ 2,061,093 $ 2,621,205
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/T/