Press Release
QSound Labs Reports First Quarter Results for 2005 at Annual Shareholders Meeting
Calgary, Alberta - April 29, 2005 -- QSound Labs, Inc. (NASDAQ: QSND), a leading developer of audio and voice software products, today reported its first quarter financial results at its 2005 Annual Shareholders meeting. Revenues for the three months ended March 31, 2005 were $477,000 as compared to $510,000 for the same period in FY2004. The net loss for the period was $(375,000) or $(0.04) per share as compared to a net loss of $(643,000) or $(0.09) per share for the same period in FY2004.
The Company reported a working capital surplus of $3,111,000 at March 31, 2005 of which cash comprised $2,747,000.
All proposed motions were carried at the shareholder meeting, including the election of directors, who as their first order of business appointed Grant Thornton LLP to act as auditors of the Company following the resignation, at the Company's request, of KPMG LLP as part of new initiatives related to containment of higher regulatory compliance costs in the Sarbanes-Oxley era.
In reviewing the status of the Company, David Gallagher, President of QSound
Labs noted the following achievements during the previous year:
The license of QXpanderTM stereo enhancement and Q3D® positional audio
to Qualcomm Incorporated, the world leader in CDMA technology, for use in their new enhanced multimedia
chipsets, was an excellent launching pad and endorsement for the Company's microQTM product suite. Qualcomm is now shipping sample quantities of these chipsets to their customer base, for use
in 3G enhanced mobile products.
These same technologies were licensed by Vodafone for use in its VFX reference implementation for
3G products.
The incorporation of microQ software in SmartPhones manufactured by MiTAC, E-TEN and Wistron is an
indicator of the future trend towards using cost effective software solutions for audio rather than
hardware specific solutions. This trend will result in semiconductor companies incorporating new features
into their products thus opening up the market for our technology to larger volume product shipments.
The Company has successfully integrated its microQ software into platforms from most of the world's
leading semiconductor companies and expects to have shipped technology on chipsets from Texas Instruments,
Qualcomm and Intel by mid-2005. Additionally during that time, the Company's first Symbian phone design
win will have shipped. By the end of 2005, the Company expects its technology to be shipping on solutions
from ACD (a division of UTStarcom), ATI, Broadcom, LSI, PacketVideo, Pulsus Technology and Samsung
Semiconductors. All of these relationships were established in 2004 but given the complex nature of
these custom baseband and multimedia chipsets, design cycles are much longer than the Company has
experienced in the consumer electronics and PC markets previously.
In the PC market, the Company has licensed its technology to VIA and Sony VAIO and in the DVD
market has expanded its license with Toshiba to include DVD-R products.
The Company has also made progress in developing a new VoIP product line for the small business market
and expects to conclude regulatory testing in time for a product launch later this year.
In conclusion, Mr. Gallagher stated "Management has been keenly aware that revenue from our legacy licenses would decline through 2004 and 2005 and had targeted the mobile market to not only replace these revenues but to also grow them. The efforts of the past eighteen months, although not yet reflected in the financial statements, have gone a long way towards achieving this goal."
This release contains forward-looking statements within the meaning of the Private Securities Litigation Act of 1995 concerning, among other things, expectation in 2005 of revenues from existing audio design wins, new microQ licenses and sales of new VoIP products, and little or no increase in expenses. 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, dependence on intellectual property, rapid technological change, competition, general economic and business conditions, continued growth of multimedia usage in the mobile devices market 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, 2005 and December 31, 2004
(Expressed in United States dollars, prepared using US GAAP)
March 31, December 31,
2005 2004
ASSETS
Current assets:
Cash and cash equivalents $ 2,746,529 $ 3,327,543
Accounts receivable 462,677 210,967
Inventory 121,012 162,568
Deposits and prepaid expenses 135,479 61,438
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3,465,697 3,762,516
Capital assets 1,298,159 1,302,598
Intangible assets 163,019 162,720
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$ 4,926,875 $ 5,227,834
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable and accrued liabilities $ 285,897 $ 245,664
Deferred revenue 68,696 59,745
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354,593 305,409
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Shareholders' equity:
Share capital (8,437,585 common shares) 46,017,097 45,792,526
Warrants 1,502,331 1,502,331
Contributed surplus 1,331,627 1,329,136
Deficit (44,278,773) (43,701,568)
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4,572,282 4,922,425
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$ 4,926,875 $ 5,227,834
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QSound Labs, Inc.
Consolidated Statements of Operations and Deficit
For the three month periods ended March 31, 2005 and 2004
(Expressed in United States dollars, prepared using US GAAP)
2005 2004
(unaudited) (unaudited)
REVENUE
Royalties and
license fees $ 337,648 $ 205,467
Product sales 139,096 304,781
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476,744 510,248
Cost of
product sales 46,806 138,663
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429,938 371,585
EXPENSES:
Marketing 230,974 350,476
Operations 43,230 71,536
Product
engineering 227,025 224,517
Administration 192,601 255,467
Foreign
exchange loss 1,971 150
Depreciation and
amortization 101,684 107,629
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797,485 1,009,775
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OPERATING
(LOSS) PROFIT (367,547) (638,190)
OTHER ITEMS
Interest and
other income 11,453 1,139
Other (19,053) (5,527)
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(7,600) (4,388)
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NET (LOSS)
INCOME FOR
PERIOD (375,147) (642,578)
DEFICIT
BEGINNING
OF PERIOD (43,903,626) (41,977,680)
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DEFICIT END
OF PERIOD $(44,278,773) $(42,620,258)
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INCOME PER
COMMON SHARE $ (0.04) $ (0.09)
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QSound Labs, Inc.
Consolidated Statements of Cash Flows
For the three month periods ended March 31, 2005 and 2004
(Expressed in United States dollars, prepared using US GAAP)
2005 2004
(unaudited) (unaudited)
Cash provided
by (used in)
OPERATIONS
(Loss) Income
for the period $ (375,147) $ (642,578)
Items not
requiring
(providing)
cash:
Depreciation
and
amortization 101,684 107,629
Compensation
cost of
options issued 22,037 108,307
Changes in
working capital
balances (249,903) 263,361
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(501,329) (690,003)
FINANCING
Issuance of
common shares,
net 17,859 35,070
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17,859 35,070
INVESTMENTS
Purchase of
capital assets (82,654) (31,666)
Purchase of
intangible
assets (14,890) (15,861)
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(97,544) (47,527)
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Increase
(decrease)
in cash (581,014) (702,460)
Cash and cash
equivalents
beginning of
period 3,327,543 2,061,093
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Cash and cash
equivalents
end of period $ 2,746,529 $ 1,358,633
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/T/