Press Release
1999 4th Quarter Report
Calgary, Alberta - February 24, 2000 -- QSound Labs,
Inc. (NASDAQ: QSND) a leading supplier of audio and e-commerce software
solutions, reported results for the fourth quarter and the twelve-month
period ended December 31, 1999. Revenues of $1,199,000 for the quarter
increased 93% over revenues of $620,000 for the comparable quarter of 1998
and increased 41% over revenues of $848,000 for the previous quarter.
Total 1999 revenues were up 71% to $3,626,000 compared to $2,125,000 for
1998.
Operating profit for the fourth quarter totaled $107,000 compared to an
operating loss of $345,000 in 1998. The audio business segment accounted
for over 78% of fourth quarter revenues and 90% of the operating profit.
Our e-commerce business segment is still in the development stage.
The Company reported a fourth quarter net loss of $103,000, or $0.00 per
share as compared to a loss of $385,000, or $0.01 per share in the fourth
quarter of 1998. The 1999 results include Goodwill amortization of
$160,000. For the year ended December 31, 1999, the net loss was
$2,303,000 or $0.09 per share compared to $1,237,000 or $0.05 per share in
1998. The 1999 results include charges totaling $1,756,000 in connection
with the August acquisition of Virtual Spin Corporation.
"Management is satisfied with the overall growth year-overyear," said
Ralph Ashman, Vice President and Chief Financial Officer, QSound Labs.
"Our strategy of developing multiple revenue streams was particularly
effective in this quarter, since the growth occurred in the PC, Consumer
Electronic and Internet Audio industries, while Healthcare remained flat.
We are particularly pleased that each of our business segments - audio and
e-commerce - were operationally profitable in the fourth quarter."
Additional accomplishments in the fourth quarter include:
Audio - QSound Labs, Inc.
- Mitsubishi Electronics has developed a new family of QSurround based processor chips. The Company realized first revenues from these products in the quarter;
- Boston Acoustics began marketing their first Universal Serial Bus multimedia sound system with QSound's soft audio solution;
- The Company announced software plug-ins for both the WinAmp and Linux platforms and tha availability of iQ™ for RealNetworks' RealJukebox and RealJukebox Plus; and,
- AudioPix™, a product that enables web users to combine images with music, was introduced at the fall COMDEX.
E-Commerce - QCommerce, Inc.
- The operation was marginally profitable;
- Significant efforts were expended to implement the NewAgeCities.com (NASDAQ:NACT) partnership;
- The QCommerce web site was developed and launched;
- The upgrade of Internet Store to version 5.2 was completed and implemented; and,
- Significant marketing efforts, aimed at securing strategic partnerships, were undertaken.
Outlook
"In 2000, QSound Labs will focus on developing its Internet properties,
www.qsound.com and www.qcommerce.com," stated David Gallagher, President
and Chief Executive Officer. "Through its relationship with RealNetworks
(NASDAQ: RNWK) and its QSound Affiliate Program, the Company has laid the
foundations for significant growth in delivering entertainment software
over the Internet. The Company plans to unlock shareholder value in
QCommerce, Inc. by entering into strategic relationships with providers of
complementary e-commerce technologies and services. QCommerce will be a
standalone entity with its own independent management and ability to draw
capital from the financial markets. This could entail an IPO of the new
corporate identity."
This release contains
forward-looking statements within the meaning of the Private Securities
Litigation Act of 1995 concerning, among other things, future growth and
profitability and including statements made by Mr. David Gallagher.
Investors are cautioned that such forward-looking statements involve risk
and uncertainties, which could cause actual results, performance or
achievements of the Company, 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 the
Company's ability to carry out its business strategy and marketing plans,
including availability of sufficient resources for the Company to do so
timely and cost effectively, dependence on the performance of third
parties who have agreed to market the Company's technologies, dependence
on intellectual property, uncertainties relating to product development
and commercial introduction, rapid technological change and competition,
continued growth of the Internet, general economic and business conditions
and other risks which may be detailed from time to time in the Company's
periodic reports filed with the Securities and Exchange Commission.
Forward-looking statements are based on the current expectations,
projections and opinions of the Company's management, and the Company
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
(Unaudited)
(Expressed in United States Dollars)
As at December 31, 1999
USD USD
December 31 December 31
1999 1998
-------------------------------------------------------------------
ASSETS
Current assets:
Cash and short term deposits $ 1,524,363 $ 2,125,613
Accounts receivable 1,090,049 783,641
Short term investments 825,000 655,243
Deposits and prepaid expenses 335,575 75,280
Inventory 215,471 225,706
---------- ----------
3,990,458 3,865,483
Capital assets and other
long-term assets 1,345,039 934,454
Goodwill & other intangible assets 4,215,946 -
---------- ----------
$ 9,551,443 $ 4,799,937
---------- ----------
---------- ----------
LIABILITIES, SHARE CAPITAL AND DEFICIT
Current liabilities:
Accounts payable and
accrued liabilities $ 567,564 $ 171,870
Deferred revenue 7,418 44,622
--------- ----------
574,982 216,492
--------- ----------
Share capital and deficit:
Common shares (26,667,699 shares) 39,355,992 32,939,632
Additional paid in capital-
stock options 129,131 -
Share subscriptions paid 150,340 -
Deficit (30,659,002) (28,356,187)
----------- -----------
8,976,461 4,583,445
----------- -----------
$ 9,551,443 $ 4,799,937
---------- -----------
---------- -----------
QSOUND LABS, INC.
Consolidated Statements of Operations and Deficit
(Unaudited)
(Expressed in USD Dollars)
For three For three For the year For the year
months months ended ended
ended Dec. 31 ended Dec. 31 Dec. 31 Dec. 31
1999 1998 1999 1998
------------------------------------------------------------------
Revenue:
Royalties and
product sales $ 1,198,896 $ 620,130 $ 3,625,623 $ 2,125,372
Cost of products
sold (117,291) (212,914) (359,613) (283,352)
------------ ----------- ----------- -----------
Gross Profit
(loss) 1,081,605 407,216 3,266,010 1,842,020
------------ ----------- ----------- -----------
Expenses:
Marketing 481,296 312,276 1,630,674 1,301,990
Product
engineering 373,861 365,027 1,444,389 1,292,313
Administration 119,258 75,049 557,403 454,482
------------ ----------- ----------- -----------
974,415 752,352 3,632,466 3,048,785
------------ ----------- ----------- -----------
Operating Profit
(loss) 107,190 (345,136) (366,456) (1,206,765)
Depreciation and
amortization (229,657) (63,375) (543,729) (262,815)
Interest income 16,305 23,293 73,116 93,664
Gain on sale of
assets 3,214 - 23,714 150,889
Write off of
Acquired In-Process
Research & Development - - (1,489,460) -
Interest on long-term
debt - - - (12,382)
------------ ----------- ----------- -----------
Net profit (loss)
for the period (102,948) (385,218) (2,302,815) (1,237,409)
Deficit, beginning
of period (30,556,054) (27,875,724) (28,356,187) (27,023,533)
Repurchase of
common shares - (95,245) - (95,245)
----------- ----------- ----------- ------------
Deficit, End
of Year $(30,659,002)$(28,356,187)$(30,659,002)$(28,356,187)
----------- ----------- ----------- ------------
----------- ----------- ----------- ------------
Loss per common
share under
United States
GAAP $(0.00) $(0.01) $(0.09) $(0.05)
----- ----- ----- -----
----- ----- ----- -----
QSound Labs, Inc.
Consolidated Statements of Cash Flows
(Unaudited)
(Expressed in USD Dollars)
For three For three For the year For the year
months months ended ended
ended Dec. 31 ended Dec. 31 Dec. 31 Dec. 31
1999 1998 1999 1998
-------------------------------------------------------------------
Cash provided by (used in)
Operations
Loss for the
period $(102,948) $(385,218)$(2,302,815)$(1,237,409)
Items not requiring
(providing) cash
Depreciation and
amortization 229,657 63,375 543,729 262,815
Gain on sale of
capital assets (3,214) (301,778) (23,714) (150,889)
Write off of acquired
in-process research
& development - - 1,489,460 -
Changes in working
capital balances (664,043) 144,225 (367,735) 260,791
--------- --------- --------- ---------
(540,548) (479,396) (661,075) (864,692)
--------- --------- --------- ---------
Financing
Issuance of shares,
net 522,061 521,614 1,911,344 1,235,985
Share subscriptions
paid 150,340 - 150,340 -
Repurchase of
common shares, net - (334,737) - (334,737)
Repayments of
long-term debt - 209,320 - (9,212)
--------- --------- ---------- ---------
672,401 396,197 2,061,684 892,036
--------- --------- ---------- ---------
Investments
Purchase of capital
assets (399,091) 183,793 (687,482) (240,645)
Goodwill & other
Intangible assets (14,411) - (1,338,091) -
Proceeds from sale
of capital assets 3,214 (318,678) 23,714 248,587
--------- --------- ---------- ---------
(410,288) (134,885) (2,001,859) 7,942
--------- --------- ---------- ---------
Increase (decrease)
in cash (278,435) (218,084) (601,250) 35,286
Cash, beginning
of period 1,802,798 2,343,697 2,125,613 2,090,327
---------- ---------- ---------- -----------
Cash, end of
Period $ 1,524,363 $ 2,125,613 $ 1,524,363 $ 2,125,613
---------- ---------- ---------- -----------
---------- ---------- ---------- -----------
/T/