Press Release
QSound Labs Reports Third Quarter Results for 2008
Calgary, Alberta, November 14, 2008 -- QSound Labs, Inc. (NASDAQ: QSND), a leading developer of multimedia software solutions, today reported financial results for the third quarter of FY2008. For the three months ended September 30, 2008, the consolidated revenues were $395,000 as compared to $672,000 for the same quarter in FY2007. The net loss for the third quarter was $(935,000) or $(0.09) per share as compared to $(219,000) or $(0.02) per share in FY2007. During the quarter, the Company was informed by one of its licensees that for periods prior to this quarter, the licensee had overpaid royalties to the Company. Consequently, the Company has issued a credit note for $286,000 based on this notification. This reduction in earnings has been reflected in the third quarter results. Without this reduction, the net loss for the third quarter would have been $(649,000) or $(0.06) per share.
Consolidated revenues for the nine months ended September 30, 2008 were $1,480,000 compared to $2,075,000 for the same period in FY2007. Net loss for the nine month period was $(1,799,000) or $(0.18) per share as compared to $(742,000) or $(0.08) per share in FY2007.
The Company reported a working capital surplus of $766,000 as at September 30, 2008 of which cash comprised $1,068,000.
“The first shipments of mQFX enhanced phones commenced in this quarter and are expected to ramp moving forward. However revenues from mQSynth have been decreasing in FY2008, thus the Company continues to report an operating loss” stated David Gallagher, President and CEO of QSound Labs. “The unexpected request by one of our customers to issue a credit note regarding previously reported revenues, has been reflected in the third quarter financial statements and has had the effect of reducing working capital by $286,000. Given the current macro and micro economic circumstances, management has implemented a cost containment program designed to support existing revenue streams and pursue new customer opportunities for the foreseeable future. The Company has included a going concern note in the third quarter financial statements to address these conditions.”
“In addition to mQFX, the Company is pursuing licensing opportunities for its new products, Ripp3D and QVoice. Ripp3D is an industry leading 3D graphics solution for mobile 3D games and QVoice is a feature rich noise reduction and echo cancellation software solution for mobile devices, headsets and automotives.”
About QSound Labs, Inc.
Since its inception in 1988, QSound Labs, Inc. has established itself as one of the world's leading audio technology companies. The Company has developed numerous innovative, proprietary audio solutions based on extensive research into human auditory perception. These technologies include stereo enhancement, virtual surround sound, 3D positional audio and voice enhancement for the mobile devices and consumer electronics markets. QSound Labs’ cutting-edge audio technologies create rich, immersive 3D audio environments allowing consumers to enjoy stereo surround sound from headphones or from two, four and up to 7.1 speaker systems. The company’s customer and partner roster includes Aricent, ARM, Broadcom, CSR, LG, MiTAC, Panasonic, Pantech, Qualcomm, Samsung, Sony VAIO, Symbian, STMicroelectronics, and Toshiba among others. QSound Labs supports its semiconductor, software and OEM partners globally with offices in Canada, China, Korea and Japan. To hear 3D audio demos and learn more about QSound, visit our web site at http://www.qsound.com.
This release contains forward-looking statements within the meaning of the Private Securities Litigation Act of 1995 concerning, among other things, expectation of increasing shipments of mQFX enabled phones, new customer opportunities, licensing opportunities for Ripp3D and QVoice, and implementation of cost containment measures. 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 continued growth of demand for QSound's technologies in the mobile devices market, successful licensing of Ripp3D and QVoice, QSound's ability to implement its cost containment program while carrying out its product development, business strategy and marketing plans, loss of relationships with companies that do business with QSound, successful distribution of QSound-enabled products by licensees, dependence on intellectual property, rapid technological change, competition, global deterioration in 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.
Consolidated Balance Sheets
As at September 30, 2008 and December 31, 2007 (unaudited)
(Expressed in United States dollars under United States GAAP)
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September 30, 2008 December 31, 2007
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ASSETS
Current assets
Cash and cash equivalents $ 1,067,600 $ 1,232,255
Accounts receivable (net) 468,884 506,648
Note receivable 25,330 27,400
Inventory 2,557 12,217
Deposits and prepaid expenses 203,393 188,568
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1,767,764 1,967,088
Property and equipment 229,509 258,414
Deferred development costs 151,242 194,915
Intangible assets 2,931,134 70,260
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$ 5,079,649 $ 2,490,677
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable and accrued
liabilities $ 257,203 $ 262,718
Obligation to arrange
repurchase of shares 500,000 -
Current portion of
long term debt 114,777 -
Deferred revenue 129,750 22,820
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1,001,730 285,538
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Liability for pension benefit 66,643 5,079
Long term debt 1,846,554 118,220
Shareholders' equity
Share capital 48,250,222 47,675,739
Warrants 2,386,741 1,027,114
Contributed surplus 2,969,113 2,959,339
Deficit (51,278,498) (49,479,722)
Accumulated other
comprehensive loss (162,856) (100,630)
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2,164,722 2,081,840
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$ 5,079,649 $ 2,490,677
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Consolidated Statements of Operations, Comprehensive Loss and Deficit
(unaudited)
(Expressed in United States dollars under US GAAP)
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For the three For the three For the nine For the nine
months ended months ended months ended months ended
Sept 30, 2008 Sept 30, 2007 Sept 30, 2008 Sept 30, 2007
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REVENUE
Royalties and
license fees $ 346,868 $ 618,131 $ 1,326,412 $ 1,890,999
Product sales 48,212 54,163 153,919 183,685
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395,080 672,294 1,480,331 2,074,684
Sales refund 285,912 - 285,912 -
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109,168 1,194,419
Cost of product
sales 3,363 15,167 37,728 71,337
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105,805 657,127 1,156,691 2,003,347
EXPENSES
Marketing 300,922 302,253 872,024 1,036,081
Operations 38,228 36,490 111,842 103,395
Product
engineering 224,603 200,063 721,046 548,062
Administration 287,399 264,405 903,522 846,670
Foreign
exchange loss
(gain) 2,495 915 3,787 1,106
Amortization 142,100 50,635 225,887 151,151
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995,747 854,761 2,838,108 2,686,465
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Loss before
other items (889,942) (197,634) (1,681,417) (683,118)
OTHER ITEMS
Interest income 4,497 16,168 14,959 59,812
Interest expense (27,102) (20,794) (58,181) (61,705)
Accretion
expense (19,070) (8,361) (57,207) (24,882)
Gain on
sale of
capital
assets - - - 586
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(41,675) (12,987) (100,429) (26,189)
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Loss before
taxes (931,617) (210,621) (1,781,846) (709,307)
Foreign
withholding tax (3,353) (8,021) (16,929) (32,557)
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Net loss and
comprehensive loss
for the period (934,970) (218,642) (1,798,775) (741,864)
Deficit,
beginning of
period (50,343,527) (50,098,495) (49,479,722) (49,575,273)
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Deficit, end of
period $(51,278,497) $(50,317,137) $(51,278,497) $(50,317,137)
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Loss per common
share (basic
and diluted) $ (0.09) $ (0.02) $ (0.18) $ (0.08)
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Consolidated Statements of Cash Flows
(unaudited)
(Expressed in United States dollars under United States GAAP)
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For the three For the three For the nine For the nine
months ended months ended months ended months ended
Sept 30, 2008 Sept 30, 2007 Sept 30, 2008 Sept 30, 2007
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Cash provided by
(used in)
OPERATIONS
Loss for the
period $ (934,970) $ (218,642) $(1,798,775) $ (741,864)
Items not
requiring cash:
Amortization 142,100 45,581 225,887 151,151
Stock based
compensation 48,289 45,906 25,355 215,402
Accretion
expense 19,070 (2,487) 57,207 24,882
Employee future
benefits 11,034 - (661) -
Gain on
sale of
capital assets - - - (586)
Other - (355) (637) (1,722) Changes in non-cash
working capital
balances 298,353 261,675 134,014 (627,945)
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(416,125) (391,672) (1,357,611) (980,682) FINANCING
Issuance of
common shares
and warrants
(net) 1,918,530 59,644 1,918,530 156,499
Subscriptions
for issuable
shares (1,750,000) - - -
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168,530 59,644 1,918,530 156,499
INVESTMENTS
Note receivable (293) - 2,707 36,000
Purchase of
property and
equipment (16,672) (4,545) (30,502) (13,912)
Purchase of
intangible
assets (690,584) (3,876) (697,779) (7,011) Proceeds on
sale of
capital assets - - - 586
------------------------------------------------------------------------
(707,549) (8,421) (725,574) 15,663
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(Decrease)
increase in
cash and cash
equivalents (955,144) (324,547) (164,655) (808,520)
Cash and cash
equivalents,
beginning of
period 2,022,744 1,832,503 1,232,255 2,316,476
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Cash and cash
equivalents, end
of period $ 1,067,600 $ 1,507,956 $ 1,067,600 $ 1,507,956
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For more information please contact:
Investor Relations
Paula Murray
QSound Labs, Inc.
+1-954-796-8798
paula.murray@qsound.com