Press Release
QSound Labs Reports Second Quarter Results for 2003
Calgary, Alberta - August 12, 2003 -- QSound Labs, Inc. (NASDAQ: QSND), a leading developer of audio,
e-commerce and multimedia software products, reported revenues for the three months ended June 30, 2003
of $383,000 as compared to $870,000 for the same period in FY2002. The operating loss for the quarter
was $(401,000) or $(0.06) per share as compared to an operating profit of $188,000 or $0.03 per share
for the same period last year. After allowing for non-cash items such as depreciation, and foreign
exchange gains, the net loss for the period was $(327,000) or $(0.05) per share as compared to net
income of $84,000 or $0.01 per share for the same period in FY2002.
Revenues for the six months ended June 30, 2003 were $1,214,000 compared to $1,625,000 in FY2002. The
operating loss was $(223,000) or $(0.03) per share in FY2003 and the operating profit was $356,000 or
$0.05 per share in FY2002. Net loss for FY2003 was $(239,000) or $(0.03) per share as compared to net
income of $173,000 or $0.02 per share in FY2002.
The Company reported a working capital surplus of $3,214,000 at June 30, 2003 of which cash comprised
$3,082,000. Cash flow from operations totaled $480,000 for the six month period, most of which was
retained, resulting in a cash increase of $461,000 for the period.
"This was an important quarter for the Company as we made significant progress with the initiatives
announced at our shareholder meeting in June," stated David Gallagher, President and CEO of QSound Labs.
"As anticipated, the financial performance for this quarter was weak. However as planned, the combination
of new revenue streams and our strong balance sheet will ensure an improved performance in the coming
periods."
"Specifically our microQ product suite for the mobile and handheld market has been well received and we
will have designs wins in the near future. Royalty revenue from these design wins would start in FY2004.
Also, we are now ready to ship our first VoIP products under the QTelNet brand and this will contribute
financially during the third quarter and is expected to grow moving forward."
This release contains
forward-looking statements within the meaning of the Private Securities
Litigation Act of 1995 concerning, among other things, expectation of
increasing royalties from existing licensees including Philips, continued
self-sustainment from QSound's audio and e-commerce businesses, and
QSound's business relationship with a private company including planned
development and commercial introduction of new products for telephony and
networking industries. 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,
including availability of sufficient resources to do so timely and cost
effectively, 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.
/T/
QSound Labs, Inc.
Consolidated Balance Sheets
As at June 30, 2003 and December 31, 2002
(Expressed in United States dollars, prepared using US GAAP)
June 30, 2003 December 31, 2002
(unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 3,082.237 $ 2,621,205
Accounts receivable 248,773 929,519
Inventory 127,309 16,455
Deposits and prepaid
expenses 74,083 58,674
----------------------------------------------------------------------
3,532,402 3,625,853
Note receivable - 500,000
Capital assets 1,218,965 747,553
Goodwill 2,184,589 2,184,589
Intangible assets 198,606 213,771
----------------------------------------------------------------------
$ 7,134,562 $ 7,271,766
----------------------------------------------------------------------
LIABILITIES AND
SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable and
accrued Liabilities $ 219,180 $ 220,894
Deferred Revenue 99,478 120,511
----------------------------------------------------------------------
318,658 341,405
Shareholders' equity:
Share capital (7,177,344
common shares) 44,212,679 44,088,094
Contributed Surplus 1,114,316 1,114,316
Deficit (38,511,091) (38,272,049)
----------------------------------------------------------------------
6,815,904 6,930,361
----------------------------------------------------------------------
$ 7,134,562 $ 7,271,766
----------------------------------------------------------------------
QSound Labs, Inc.
Consolidated Statements of Operations and Deficit
For the periods ended June 30, 2003 and 2002
(Expressed in United States dollars, prepared using US GAAP)
For three For three For six For six
months months months months
ended ended ended ended
June 30, June 30, June 30, June 30,
2003 2002 2003 2002
(unaudited)(unaudited)(unaudited)(unaudited)
REVENUE
Royalties, license fees
and product sales $ 95,723 $ 571,418 $ 576,408 $ 991,934
Product Sales 287,555 298,747 637,750 633,393
----------------------------------------------------------------------
383,308 870,165 1,214,158 1,625,327
Cost of Product Sales 64,276 49,365 147,013 58,636
----------------------------------------------------------------------
319,032 820,800 1,067,145 1,566,691
EXPENSES:
Marketing 322,449 259,116 579,247 453,132
Operations 40,185 62,102 76,254 143,634
Product engineering 202,296 160,157 353,950 340,717
Administration 155,255 147,384 280,467 267,779
----------------------------------------------------------------------
720,185 628,759 1,289,918 1,205,262
----------------------------------------------------------------------
Operating (LOSS) profit (401,153) 192,041 (222,773) 361,429
Other items
Depreciation and
amortization (82,459) (91,010) (162,724) (171,047)
Interest and other 17,191 6,806 23,122 13,292
Income
Gain on sale of capital
assets (1,908) 29 (1,908) 29
Other 140,846 (23,577) 125,241 (31,065)
----------------------------------------------------------------------
73,670 (107,752) (16,269) (188,791)
----------------------------------------------------------------------
Net income (loss) for the
period (327,486) 84,289 (239,042) 172,638
Deficit beginning of
period (39,312,652) (39,401,001)
(38,847,161) (38,668,091)
----------------------------------------------------------------------
Deficit end of period $(38,183,608) $(38,272,049)
$(39,312,652) $(39,401,001)
----------------------------------------------------------------------
Income (loss) per
common share $ (0.05) $ 0.01 $ (0.03) $ 0.02
----------------------------------------------------------------------
QSound Labs, Inc.
Consolidated Statements of Cash Flows
For the periods ended June 30, 2003 and 2002
(Expressed in United States dollars, prepared using US GAAP)
For three For three For six For six
months months months months
ended ended ended ended
June 30, June 30, June 30, June 30,
2003 2002 2003 2002
(unaudited)(unaudited)(unaudited)(unaudited)
Cash provdided by
(used in)
OPERATIONS
Income (loss) for the
period $(327,483)$ 84,289 $ (239,042) $ 172,638
Items not requiring
(providing) cash:
Depreciation and
amortization 82,459 91,010 162,724 171,047
Compensaation cost of - - 5,864 -
options issued to
non-employees
Loss (gain) on sale
of capital assets 1,908 (29) 1,908 (29)
Changes in working capital
balances 463,552 (80,174) 548,645 (318,985)
----------------------------------------------------------------------
220,436 95,096 480,099 24,671
----------------------------------------------------------------------
FINANCING
Issuance of common 8,587 - 9,997 -
shares. net
----------------------------------------------------------------------
8,587 - 9,997 -
----------------------------------------------------------------------
INVESTMENTS
Purchase of capital assets (9,565) (29,336) (10,409) (97,487)
Purchase of intangible
assets (12,797) (11,155) (24,277) (16,156)
Change in working capital
for investment purposes - (350,000) - (350,000)
Proceeds from sale of
capital assets 5,622 29 5,622 29
----------------------------------------------------------------------
(16,740) (390,462) (29,064) (463,614)
----------------------------------------------------------------------
Increase (decrease) in
cash 212,283 (295,366) 461,032 (438,943)
Cash and cash equivalents
beginning of period 2,869,954 1,904,315 2,621,205 2,047,892
----------------------------------------------------------------------
Cash and cash
equivalents
end of period $ 3,082,237 $ 3,082,237
$ 1,608,949 $ 1,608,949
----------------------------------------------------------------------
/T/