Press Release
QSound Labs Reports Third Quarter Results for 2001
Calgary, Alberta-November 8, 2001 - QSound Labs, Inc. (NASDAQ: QSND) a
leading developer of audio, e-commerce and multimedia software products,
reported revenues for the three months ended September 30, 2001 of
$765,000 as compared to $1,201,000 for the same period in FY2000. The
operating profit for the quarter was $109,000 or $0.02 per share as
compared to $100,000 or $0.01 per share for the same period last year.
Including non-cash items such as depreciation and amortization of
goodwill, the net loss for the period was $(95,000) or $(0.01) per share
as compared to $(818,000) or $(0.12) per share for the same period in
FY2000.
Revenues for the nine months ended September 30, 2001 were $2,429,000
compared to $3,236,000 for the same period in 2000. The operating profit
for the same period was $201,000 or $0.03 per share as compared to a loss
of $(68,000) or $(0.01) in FY2000. Net loss for the nine month period was
$(434,000) or $(0.06) per share in 2001 and $(2,436,000) or $(0.36) per
share in 2000.
The Company reported a working capital surplus of $2.5 million and
continues to generate positive cash flow from operations. During this
quarter, the Company used $57,000 of the $236,000 cash generated from
operations to repurchase and cancel 72,000 common shares of the Company.
For the nine months ended September 30, 2001, the Company expended
$350,000 of the $414,000 cash generated from operations to repurchase and
cancel 234,850 common shares of the Company. The Company also retired all
of its debt during this period.
Revenue from the audio business unit is down 12% for the year as compared
to the same period in FY2000. The recurring revenue base for the
e-commerce business unit grew by 10% over the same time period. In the
previous year, e-commerce revenue included lump sum license fees that were
non-recurring: for the nine months ended September 2000, these revenues
totaled $575,000.
“The Company continues to operate as a positive cash flow entity because
of its effective cost control program,” stated David Gallagher, President
and CEO of QSound Labs, “even though the majority of our audio technology
licensees and partners continue to experience shipment reductions for the
year. The ongoing economic slowdown has also had the effect of delaying
several key product introductions from our audio business partners this
year but all are currently scheduled for release within the next three
months. These opportunities, plus management’s continuing efforts to
develop new revenue streams, provide a basis for optimism when looking
forward to FY2002. ”
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, dependence on intellectual property, uncertainties
relating to product development and commercial introduction, rapid
technological change and competition, manufacturing uncertainties and
other risks 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.
QSound Labs, Inc.
Consolidated Balance Sheets
As at September 30, 2001 and December 31, 2000
(Expressed in United States dollars)
September 30, December 31,
2001 2000
(unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 1,723,668 $ 2,264,639
Accounts receivable 820,778 1,166,941
Inventory 56,777 48,431
Deposits and prepaid expenses 128,085 108,752
----------------------------
2,729,308 3,588,763
INVESTMENTS 35,010 42,557
CAPITAL ASSETS 882,360 1,071,618
INTANGIBLE ASSETS 2,448,541 2,873,946
----------------------------
$ 6,095,219 $ 7,576,884
----------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable and
accrued liabilities $ 208,310 $ 352,865
Consideration payable on acquisition - 550,000
Deferred revenue 14,654 9,253
----------------------------
222,964 912,118
----------------------------
Shareholders' equity
Share capital (7,148,589 common shares) 43,974,901 45,479,152
Contributed surplus 1,159,405 5,648
Deficit (39,102,561) (38,668,091)
Accumulated other comprehensive income (159,490) (151,943)
----------------------------
5,872,255 6,664,766
----------------------------
$ 6,095,219 $ 7,576,884
----------------------------
QSound Labs, Inc.
Consolidated Statements of Operations and Deficit
For the Periods Ended September 30, 2001 and 2000
(Expressed in United States dollars)
For three For three For nine For nine
months ended months ended months ended months ended
September 30, September 30, September 30, September 30,
2001 2000 2001 2000
(unaudited) (unaudited) (unaudited) (unaudited)
REVENUE
Royalties, license
fees and product
sales $ 765,188 $ 1,201,357 $ 2,429,180 $ 3,235,628
Cost of product
sales 7,754 71,368 44,083 148,903
------------------------------------------------------
757,434 1,129,989 2,385,097 3,086,725
------------------------------------------------------
EXPENSES:
Marketing 240,665 359,767 819,917 1,043,153
Operations 52,259 150,000 234,618 225,000
Product
engineering 212,544 348,184 683,381 1,304,979
Administration 142,762 171,721 446,623 581,811
------------------------------------------------------
648,230 1,029,672 2,184,539 3,154,943
------------------------------------------------------
OPERATING
PROFIT (LOSS) 109,204 100,317 200,558 (68,218)
OTHER ITEMS
Depreciation and
amortization (207,728) (739,170) (676,045) (1,410,710)
Write-off of
acquired in-process
research and
development - - - (446,639)
Write-down of
investments - (200,000) - (450,000)
Other 3,343 21,025 41,017 (60,535)
------------------------------------------------------
NET INCOME (LOSS)
FOR PERIOD (95,181) (817,828) (434,470) (2,436,102)
DEFICIT BEGINNING
OF PERIOD (39,007,380) (32,479,333) (38,668,091) (30,861,059)
------------------------------------------------------
DEFICIT END
OF PERIOD $(39,102,561) $(33,297,161) $(39,102,561) $(33,297,161)
------------------------------------------------------
INCOME (LOSS) PER
COMMON SHARE $ (0.01) $ (0.12) $ (0.06) $ (0.36)
------------------------------------------------------
QSound Labs, Inc.
Consolidated Statements of Cash Flows
For the Periods Ended September 30, 2001 and 2000
(Expressed in United States dollars)
For three For three For nine For nine
months ended months ended months ended months ended
September 30, September 30, September 30, September 30,
2001 2000 2001 2000
(unaudited) (unaudited) (unaudited) (unaudited)
Cash provided by (used in)
OPERATIONS
Income (loss) for
the period $ (95,181) $ (817,828) $ (434,470) $ (2,436,102)
Items not requiring (providing) cash:
Depreciation and
amortization 207,728 739,170 676,045 1,410,710
Gain on sale of
capital assets - (135) (6,515) (255)
Write-off of acquired
in-process research and
development - - - 446,639
Write-down of
investments - 200,000 - 450,000
Changes in working
capital balances 123,431 (161,081) 179,330 1,075,483
------------------------------------------------------
235,978 (39,874) 414,390 946,475
------------------------------------------------------
FINANCING
Issuance of common
shares, net - (136,168) - 2,604,243
Repurchase of common
shares, net (56,755) - (350,494)
Increase in debt - (500,000) - 1,000,000
Repayment of debt - - (550,000)
------------------------------------------------------
(56,755) (636,168) (900,494) 3,604,243
------------------------------------------------------
INVESTMENTS
Purchase of capital
assets (16,165) (910) (61,382) (451,781)
Purchase of intangible
assets - (20,103) - (3,078,070)
Proceeds from sale
of capital assets - 135 6,515 255
------------------------------------------------------
(16,165) (20,878) (54,867) (3,529,596)
------------------------------------------------------
Increase (decrease)
in cash 163,058 (696,920) (540,971) 1,021,122
Cash and cash
equivalents beginning
of period 1,560,610 3,242,405 2,264,639 1,524,363
------------------------------------------------------
Cash and cash
equivalents end
of period $ 1,723,668 $ 2,545,485 $ 1,723,668 $ 2,545,485
------------------------------------------------------