Press Release
QSound Labs Reports Year End 2000 and Fourth Quarter Results
Calgary, Alberta - February 26, 2001 - QSound Labs,
Inc. (NASDAQ: QSND) a leading developer of audio, e-commerce and
multimedia software products, today reported FY2000 revenue of $4.5
million, up 23% from $3.6 million in 1999 and fourth quarter revenue of
$1.2 million, up 5% from $1.1 million in the fourth quarter of 1999, and
approximately flat with the third quarter of 2000.
For FY2000, operating profit was $126,000 or $0.01 per share compared to a
loss of $(371,000) or $(0.02) per share in 1999. For the fourth quarter,
the operating profit was $188,000 or $0.01 per share as compared to
$67,000 or $0.00 per share in 1999. Including acquisition-related costs,
in accordance with generally accepted accounting principles, the net loss
for FY2000 was $7.7 million as compared to $1.9 million in 1999.
Acquisition related costs, totaling $6.1 million in FY2000, consist of one
time write-offs of purchased in-process research and development and asset
impairment, ongoing amortization of goodwill and other acquisition-related
intangibles and costs.
"The audio business segment reported its fifth consecutive quarterly
operating profit," stated David Gallagher, CEO and President of QSound
Labs. "This continuing trend coupled with our positive working capital
situation and evolving repositioning of QCommerce activities provides an
excellent base for continued growth in FY2001."
Outlook:
Looking forward to FY2001, the Company expects the audio business segment
to achieve minimum overall revenue growth of 25% from its OEM and
Downloadable Software Product activities.
- Growth in the PC/Multimedia OEM market, will be driven by Philips' marketing and sales activities for their current soundcard product line. Recently introduced as their high-end offering in the product line, Philips' Acoustic Edge has received critical acclaim and several editors' choice awards from the media. The company continues to work with Philips on defining additional features and technology development for the next generation of soundcards to be released later this year.
- It is expected that growth from the Consumer Electronics' OEM market will be flat for FY2001.
- Revenue from Starkey Laboratories is expected to increase as digital hearing aid sales continue to grow. Additionally, higher royalty rates will become effective during the first quarter of FY2001.
- Downloadable software sales are expected to grow this year as newly developed products are made available through partner Web sites and the Company's affiliate program. Our strategic relationship with RealNetworks (NASDQ: RNWK) will provide a solid foundation to achieve these goals.
Moving into FY 2001, QCommerce will benefit from
changes made in the second half of last year. While overall revenue growth
will be nominal for FY2001, it will be subscription based and
consequently, recurring, as compared to FY2000 when the majority of the
revenue base was comprised of one time payments. As well, the cost
necessary to support the new revenue model will be significantly lower
than in FY2000 and all steps have now been taken to establish the new
infrastructure. Given the uncertainty generated by the changed perception
of the e-commerce environment, the Company is expecting the QCommerce
Business Unit to break even in FY2001 and has reason to believe in
potential upside. There is now less competition, more traditional
vendor-supplier relationships and a very large market to exploit.
This release contains
forward-looking statements within the meaning of the Private Securities
Litigation Act of 1995 concerning, among other things, future financial
results. 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, commercialization of the
Company's technologies, consumer acceptance of the Company's products and
services, dependence on the performance of third parties who have licensed
the Company's technologies, manufacturing uncertainties, uncertainties
relating to product development and commercial introduction, dependence on
intellectual property, rapid technological change and competition,
continued growth of the Internet and other risks that may be detailed from
time to time in the Company's filings 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
As at December 31, 2000 and 1999
(Expressed in United States Dollars under United States GAAP)
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Dec. 31, 2000 Dec. 31, 1999
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Assets
Current assets:
Cash and cash equivalents $ 2,264,639 $ 1,524,363
Accounts receivable 1,166,941 1,090,049
Inventory 48,431 215,471
Deposits and prepaid expenses 108,752 335,575
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3,588,763 3,165,458
Investments 267,557 1,374,800
Capital assets 1,071,618 1,053,231
Intangible assets 4,573,946 4,507,754
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$ 9,501,884 $ 10,101,243
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Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable $ 254,102 $ 510,129
Accrued liabilities 1,723,763 57,434
Deferred revenue 9,253 928,118
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1,987,118 1,495,681
Long-term debt 625,000 -
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2,612,118 1,495,681
Shareholders' equity
Share capital (29,307,057 common
shares) 45,484,800 39,837,521
Deficit (38,443,091) (30,861,059)
Accumulated other comprehensive
income (151,943) (370,900)
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6,889,766 8,605,562
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$ 9,501,884 $ 10,101,243
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QSOUND LABS, INC.
Consolidated Statements of Operations and Deficit
Unaudited
(Expressed in United States Dollars under United States GAAP)
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For three For three For the For the
months months year year
ended ended ended ended
Dec. 31, Dec. 31, Dec. 31, Dec. 31,
2000 1999 2000 1999
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REVENUE
Royalties, license
fees and product
sales $ 1,233,374 $ 1,179,577 $ 4,469,002 $ 3,625,623
Cost of product
sales 59,395 117,291 208,298 359,613
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1,173,979 1,062,286 4,260,704 3,266,010
EXPENSES
Marketing 467,545 481,296 1,735,698 1,630,674
Product engineering 305,457 373,861 1,610,436 1,444,389
Administration 212,920 139,743 788,567 561,583
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985,922 994,900 4,134,701 3,636,646
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OPERATING PROFIT
(LOSS) 188,057 67,386 126,003 (370,636)
OTHER ITEMS
Depreciation and
amortization (1,125,146) (857,801) (2,535,856) (543,729)
Impairment of
assets (3,317,048) (3,317,048) -
Interest and other
income 34,108 16,305 154,788 73,116
Gain (loss) on sale
of assets (34,889) 3,214 (34,634) 23,714
Write-off of acquired
in-process research
and development 985 - (445,654) (1,489,460)
Investment
write-down (840,568) - (1,290,568) -
Foreign exchange
(loss) (7,851) (14,195) (14,015) (5,448)
Other (43,578) - (225,048) -
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(5,333,987) (852,477) (7,708,035) (1,941,807)
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NET INCOME (LOSS)
FOR PERIOD (5,145,930) (785,091) (7,582,032) (2,312,443)
DEFICIT BEGINNING
OF PERIOD (33,297,161) (30,075,968) (30,861,059) (28,548,616)
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DEFICIT END OF
PERIOD $(38,443,091) $(30,861,059)$(38,443,091)$(30,861,059)
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INCOME (LOSS) PER
COMMON SHARE
UNDER UNITED
STATES GAPP $ (0.18) $ (0.01)$ (0.27)$ (0.09)
QSOUND LABS, INC.
Consolidated Statements of Cash Flows
Unaudited
(Expressed in United States Dollars under United States GAAP)
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For three For three For the For the
months months year year
ended ended ended ended
Dec. 31, Dec. 31, Dec. 31, Dec. 31,
2000 1999 2000 1999
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Cash provided by (used in):
Operations:
Net loss for the
year $ (5,145,930) $ (102,948) $ (7,582,032) $ (902,012)
Items not requiring
(providing) cash:
Depreciation and
amortization 1,125,146 229,657 2,535,856 632,387
Impairment of
assets 3,317,048 - 3,317,048 -
Gain on sale of
capital assets 34,889 (3,214) 34,634 (23,714)
Write down of
investment 840,568 - 1,290,568 -
Write-off of
acquired in-process
research and
development (31,153) - 415,486 -
Changes in working
capital balances (267,075) (664,043) 808,408 1,377,964
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(126,507) (540,548) 819,968 1,084,625
Issuance of shares (net) - 672,401 2,604,243 1,918,844
Increase (decrease) in
long-term liability (375,000) - 625,000 150,340
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(375,000) 672,401 3,229,243 2,069,184
Purchase of capital
assets (78,082) (399,091) (529,863) (687,482)
Purchase of intangible
assets 269,985 (14,411) (2,808,085) (1,345,591)
Proceeds from sale of
capital assets 5,120 3,214 5,375 23,714
Proceeds from sale of
other assets 23,638 - 23,638 (1,745,700)
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220,661 (410,288) (3,308,935) (3,755,059)
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Increase (decrease)
in Cash (280,846) (278,435) 740,276 (601,250)
Cash and cash
equivalents,
beginning of
period 2,545,485 1,802,798 1,524,363 2,125,613
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Cash and cash
equivalents,
end of period $ 2,264,639 $ 1,524,363 $ 2,264,639 $ 1,524,363
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/T/