Press Release
QSound Labs Reports Fourth Quarter
And Year End Results for 2002
Calgary, Alberta - February 13, 2003: QSound Labs, Inc. (NASDAQ: QSND),
a leading developer of audio, e-commerce and multimedia software products,
reported revenues for the three months ended December 31, 2002 of
$1,290,000 as compared to $597,000 for the same period in FY2001. The
operating profit for the quarter was $625,000 or $0.09 per share as
compared to an operating loss of $(164,000) or $(0.02) per share for the
same period last year. Including non-cash items such as depreciation and
amortization, net income for the period was $453,000 or $0.06 per share as
compared to a loss of $(298,000) or $(0.04) per share for the same period
in FY2001.
Revenues for the year ended December 31, 2002 were $4,224,000 compared to
$3,026,000 in FY2001. The operating profit was $1,617,000 or $0.23 per
share in FY2002 and $37,000 or $0.01 per share in FY2001. Net income for
FY2002 was $1,129,000 or $0.16 per share as compared to a loss of
$(733,000) or $(0.10) per share in FY2001.
The Company reported a working capital surplus of $3,284,000 at December
31, 2002 of which cash comprised $2,621,000. Cash flow from operations
totaled $1,188,000 for the year. After investing $614,000 in new
technology and assets, cash increased $573,000 for the year.
"We improved our financial performance dramatically in FY2002," stated
David Gallagher, President and CEO of QSound Labs. "The increase in
revenues was derived primarily from our audio algorithm licensing
business. This coupled with a successful cost containment program resulted
in a profitable year. QCommerce, while not providing growth, remained cash
flow positive throughout the year."
"As previously reported, the Company focused most of its development
efforts in FY2002 on software solutions for audio and voice applications.
During FY2003, the Company will be offering these solutions to the
cellular, handheld device, and IP telephony markets. FY2003 will see
QSound transition to an audio solutions provider as opposed to a provider
of audio algorithms. Revenue from existing algorithm licenses will
diminish and management is focused on replacing such revenue streams from
its new product lines."
"Our customers continue to be cautious with their forecasts. This, coupled
with our own efforts in new markets, hampers long range visibility so
management will continue to provide guidance on a short term basis, as we
did last year. At this time, management expects the net income for the
first quarter in FY2003 to improve over the comparable period in FY2002,
in which the net income was $88,000 or $0.01."
This release contains
forward-looking statements within the meaning of the Private
Securities Litigation Act of 1995 concerning, among other things,
expectation of revenues from existing licensees and from customers
for new products for the cellular, handheld device, and IP telephony
markets, and an improvement in revenues for the first quarter of
2003 over the first quarter of 2002. 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 the Internet 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.
QSound Labs, Inc.
Consolidated Balance Sheets
As at December 31, 2002 and 2001
(Expressed in United States dollars, prepared using US GAAP)
December 31, December 31,
2002 2001
(unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 2,621,205 $ 2,047,892
Accounts receivable 929,519 439,245
Inventory 16,455 28,587
Deposits and prepaid expenses 58,674 85,365
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3,625,853 2,601,089
Note receivable 500,000 -
Capital assets 747,553 932,776
Intangible assets 2,398,360 2,432,142
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$ 7,271,766 $ 5,966,007
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LIABILITIES AND SHAREHOLDERS'
EQUITY
Current liabilities:
Accounts payable and accrued
liabilities $ 220,894 $ 304,726
Deferred Revenue 120,511 8,282
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341,405 313,008
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Shareholders' equity:
Share capital (7,156,074 common
shares) 44,088,094 43,939,684
Contributed Surplus 1,114,316 1,114,316
Deficit (38,272,049) (39,401,001)
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6,930,361 5,652,999
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$ 7,271,766 $ 5,966,007
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QSound Labs, Inc.
Consolidated Statements of
Operations and Deficit
For the Periods Ended
December 31, 2002 and 2001
(Expressed in United States dollars, prepared using
US GAAP)
For three For three For the For the
months ended months ended year ended year ended
December 31, December 31, December 31, December 31,
2002 2001 2002 2001
(unaudited) (unaudited) (unaudited)
REVENUE
Royalties,
license fees
and product
sales $ 1,290,257 $ 596,814 $ 4,224,311 $ 3,025,994
Cost of product
sales 79,210 47,355 271,530 91,438
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1,211,047 549,459 3,952,781 2,934,556
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EXPENSES:
Marketing 280,743 254,222 951,009 1,074,139
Operations 42,498 40,459 235,201 275,077
Product
engineering 138,503 267,636 643,524 951,017
Administration 124,154 151,062 506,028 597,685
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585,898 713,379 2,335,762 2,897,918
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Operating profit
(loss) 625,149 (163,920) 1,617,019 36,638
Other items
Depreciation and
amortization (175,866) (155,148) (482,662) (831,193)
Gain (loss) on
sale of capital
assets 59 (23) 740 6,492
Gain on sale of
investments - 24,327 - 24,327
Write-down of
investments - (8,300) - (8,300)
Other 3,416 4,624 (6,145) 39,126
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(172,391) (134,520) (488,067) (769,548)
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Net income
(loss) for the
period 452,758 (298,440) 1,128,952 (732,910)
Deficit
beginning of
period (39,102,561) (39,102,561) (39,401,001) (38,668,091)
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Deficit end of
period $(38,649,803)$(39,401,001)$(38,272,049)$(39,401,001)
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Basic earnings
(loss) per
common share $ 0.06 $ (0.04)$ 0.16 $ (0.10)
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Diluted earnings
(loss) per
common share $ 0.05 $ (0.04)$ 0.15 $ (0.10)
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QSound Labs, Inc.
Consolidated Statements of
Cash Flows
For the Periods Ended
December 31, 2002 and 2001
(Expressed in United States dollars, prepared using US
GAAP)
For three For three For the For the
months ended months ended year ended year ended
December 31, December 31, December 31, December 31,
2002 2001 2002 2001
(unaudited) (unaudited) (unaudited)
Cash provided by
(used in)
OPERATIONS
Income (loss)
for the period $ 452,758 $ (298,440)$ 1,128,952 $ (732,910)
Items not
requiring
(providing)
cash:
Depreciation
and
amortization 175,866 155,148 482,662 831,193
Gain on sale
of capital
assets (59) 23 (740) (6,492)
Gain on sale
of investments - - (24,327)
Write-down of
investments - 8,300 - 8,300
Changes in
working capital
balances 340,081 534,188 (423,054) 713,517
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968,646 399,219 1,187,820 789,281
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FINANCING
Issuance of
common shares,
net 39,685 - 39,685 -
Repurchase of
common shares,
net - (80,306) - (430,800)
Repayment of
debt - - - (550,000)
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39,685 (80,306) 39,685 (980,800)
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INVESTMENTS
Investments, net - 218,827 - 218,827
Purchase of
capital assets (2,595) (154,910) (113,880) (216,291)
Purchase of
intangible
assets (17,092) (34,418) (41,052) (34,418)
Proceeds from
sale of capital
assets 59 139 740 6,654
Change in
working capital
for investment
purposes - - (500,000) -
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(19,628) 29,638 (654,192) (25,228)
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Increase
(decrease) in
cash 988,703 348,551 573,313 (216,747)
Cash and cash
equivalents
beginning of
period 1,632,502 1,723,668 2,047,892 2,264,639
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Cash and cash
equivalents end
of period $ 2,621,205 $ 2,072,219 $ 2,621,205 $ 2,047,892
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