Press Release
QSound Labs Reports First Quarter Results for 2004
Calgary, Alberta – May 12, 2004 -- QSound Labs, Inc. (NASDAQ: QSND), a
leading developer of audio and voice software products, reported revenues
for the three months ended March 31, 2004 of $510,000 as compared to $831,000
for the same period in FY2003. The operating loss for the quarter was
$(422,000) or $(0.06) per share as compared to an operating profit of
$178,000 or $0.02 per share for the same period last year. After allowing
for non-cash items such as depreciation, the net loss for the period was
$(534,000) or $(0.07) per share as compared to net income of $88,000 or
$0.01 per share for the same period in FY2003
The Company reported a working capital surplus of $1,704,000 at March
31, 2004 of which cash comprised $1,359,000. Subsequent to the quarter
ending, management took action to cut costs in the IP Telephony business
unit, so as to better match the current revenues being generated from
that unit.
"We made excellent progress with our business development efforts
in the first quarter," stated David Gallagher, President of QSound
Labs. "The main focus of these efforts was the Company’s soft audio
solutions for the mobile & PC markets. The Company saw its first returns
for the investments made last year in developing microQ for the mobile
market. Specifically, the Company began recognizing revenues for microQ
in this quarter and continued to develop new relationships, which should
lead to long term growth situations. Among those, is the recently announced
availability of microQ on LSI Logic’s DSP hardware platform for mobile
products. Even more importantly, the Company is experiencing increased
demand for microQ, particularly from Europe & Asia."
"The Company is also making progress in the PC marketplace. This
has been caused by the elimination of our only standalone independent
software competitor through acquisition."
"The Philips SoundAgent 2 (“PSA2”) audio software solution developed
by the Company for Philips began shipping in the first quarter with several
of Philips mini component systems in Europe and Latin America. This distribution
of the PSA2 is in addition to the USB powered speakers and soundcards
which were previously announced as shipping with the PSA2."
"In the VoIP market, the Company continues
to market its existing product line, while at the same time gathering
feedback from our dealer channel on market requirements. The Company has
plans for new product introduction later this year, but in the meantime
has cut its cost structure to better match existing cash flow from this
business unit."
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
and new microQ licensees, licensing to the PC industry, product distribution
through Philips, and sales of existing and new IP telephony products.
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, continued growth of mobile devices
and Internet telephony products, 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, 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 March 31, 2004 and December 31, 2003
(Expressed in United States dollars, prepared using US GAAP)
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March 31, December 31,
2004 2003
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(unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 1,358,633 $ 2,061,093
Accounts receivable 406,997 221,194
Inventory 154,707 107,377
Deposits and prepaid expenses 147,583 82,921
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2,067,920 2,472,585
Capital assets 1,065,918 1,114,992
Other intangible assets 177,974 189,002
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$ 3,311,812 $ 3,776,579
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable and accrued
Liabilities $ 280,210 $ 233,198
Deferred Revenue 83,969 96,547
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364,179 329,745
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Shareholders' equity
Share capital (7,236,124 common shares) 44,254,829 44,310,198
Contributed Surplus 1,114,316 1,114,316
Deficit (42,421,512) (41,887,241)
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2,947,633 3,537,273
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$ 3,311,812 $ 3,867,018
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QSound Labs, Inc.
Consolidated Statements of Operations and Deficit
For the three month periods ended March 31, 2004 and 2003
(Expressed in United States dollars, prepared using US GAAP)
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2004 2003
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(unaudited) (unaudited)
REVENUE
Royalties and license fees $ 205,467 $ 480,655
Product sales 304,781 350,195
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510,248 830,850
Cost of product sales 138,663 82,737
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371,585 748,113
EXPENSES:
Marketing 345,684 256,798
Operations 71,536 36,069
Product engineering 224,517 151,654
Administration 152,102 125,212
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793,839 569,733
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OPERATING PROFIT (422,254) 178,380
OTHER ITEMS
Depreciation and amortization (107,629) (80,265)
Interest and other income 1,139 5,931
Other (5,527) (15,605)
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(112,017) (89,939)
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NET INCOME FOR PERIOD (534,271) 88,441
DEFICIT BEGINNING OF PERIOD (41,887,241) (38,069,991)
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DEFICIT END OF PERIOD $ (42,421,512) $ (37,981,550)
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INCOME PER COMMON SHARE $ (0.07) $ 0.01
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QSound Labs, Inc.
Consolidated Statements of Cash Flows
For the three month periods ended March 31, 2004 and 2003
(Expressed in United States dollars, prepared using US GAAP)
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2004 2003
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(unaudited) (unaudited)
Cash provided by (used in)
OPERATIONS
Income for the period $ (534,271) $ 88,441
Items not requiring (providing) cash:
Depreciation and amortization 107,629 80,265
Compensation cost of options issued - 5,864
Changes in working capital balances (263,361) 110,093
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(690,003) 284,663
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FINANCING
Issuance of common shares, net 35,070 1,410
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35,070 1,410
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INVESTMENTS
Purchase of capital assets (31,666) (844)
Purchase of intangible assets (15,861) (11,480)
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(47,527) (12,324)
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Increase (decrease) in cash (702,460) 273,749
Cash and cash equivalents
beginning of period 2,061,093 2,621,205
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Cash and cash equivalents end of period $ 1,358,633 $ 2,894,954
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/T/