Press Release
QSound Labs Reports Third Quarter Results for 2007
Calgary, Alberta, November 8, 2007 -- QSound Labs, Inc. (NASDAQ: QSND), a leading developer of audio and voice software solutions, today reported financial results for the third quarter of FY2007. For the three months ended September 30, 2007, the consolidated revenues were $672,000 as compared to $342,000 for the same quarter in FY2006. The net loss for the third quarter was $(219,000) or $(0.02) per share as compared to $(522,000) or $(0.06) per share in FY2006.
Consolidated revenues for the nine months ended September 30, 2007 were $2,075,000 compared to $1,446,000 for the same period in FY2006. Net loss for the nine month period was $(742,000) or $(0.08) per share as compared to $(1,183,000) or $(0.13) per share in FY2006.
Expenses, which are primarily incurred in Canadian dollars, continue to be affected by the fall of the US dollar which has depreciated by 7% and 15% against the Canadian dollar for the three months ended and the nine months ended September 30, 2007, respectively.
The Company reported a working capital surplus of $2,246,000 as at September 30, 2007 of which cash comprised $1,508,000.
“Royalty and recurring license fee revenue for the three months ended September 30, 2007 increased 177% to $618,131 from $223,406 for the three months ended September 30, 2006,” stated David Gallagher, President and CEO of QSound Labs. “This is a result of the continuing market penetration of the Company’s microQ audio engine into the mobile device market. For the nine months ended September 30, 2007 and 2006, royalty and recurring license fee revenue was $1,639,399 and $530,828, respectively, an increase of 209%. QSound expects royalty revenue growth to continue quarter over quarter, however, due to revenue recognition criteria there will be quarterly fluctuations in the level of recurring license fees but anticipated growth on an annual basis.”
“The majority of the growth in FY2007 has come from the success of LG’s Black Label Series of mobile phones which features microQ as its ringtone player. It is expected that LG will release several more models before the end of the year. Panasonic, BenQ, MiTAC and Pantech will also release new mobile phone models featuring microQ in the fourth quarter of 2007. Management also expects to see the first results from its strategic relationship with SUN during the fourth quarter of 2007 and continues to pursue other opportunities based on the strategic relationships established with ARM and SUN and would expect these efforts to result in revenues for the Company in FY2008.”
“The Company continues to also market its technology to the home entertainment and Bluetooth audio markets for the CSR, STMicro and Texas Instrument platforms.
About QSound Labs, Inc.
Since its inception in 1988, QSound Labs, Inc. has established itself as one of the world's leading audio technology companies. The Company has developed proprietary audio solutions that include virtual surround sound, positional audio and stereo enhancement for the mobile devices, consumer electronics, PC/multimedia, and Internet markets. QSound Labs’ cutting-edge audio technologies create rich 3D audio environments allowing consumers to enjoy stereo surround sound from two, four and up to 7.1 speaker systems. The Company’s customer and partner roster includes ARM, BenQ, Broadcom, MiTAC, Panasonic, Qualcomm, Sony Vaio and Toshiba among others. To hear 3D audio demos and learn more about QSound, visit our web site at http://www.qsound.com.
This release contains forward-looking statements within the meaning of the Private Securities Litigation Act of 1995 concerning, among other things, expectation of royalty revenue growth quarter over quarter including revenues resulting from shipments starting in Q4 2007 of new microQ enabled mobile phones from LG, Panasonic, BenQ, MiTAC and Pantech as well as expectation of revenues resulting from strategic relationships with SUN (in Q4 2007 and 2008) and with ARM in 2008. 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 distribution of QSound-enabled products by licensees, continued growth of demand for QSound's technologies in the mobile devices market, QSound's ability to carry out its product development, 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.
Consolidated Balance Sheets
As at September 30, 2007 and December 31, 2006 (unaudited)
(Expressed in United States dollars under United States GAAP)
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September 30, 2007 December 31, 2006
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ASSETS
Current assets
Cash and cash equivalents $ 1,507,956 $ 2,316,476
Accounts receivable (net) 852,175 316,298
Note receivable 27,046 6,000
Inventory 18,478 19,422
Deposits and prepaid expenses 231,282 60,933
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2,636,937 2,719,129
Note receivable – 55,325
Property and equipment 284,676 348,280
Deferred development costs 209,474 253,147
Intangible assets 75,400 98,351
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$ 3,206,487 $ 3,474,232
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable and accrued
liabilities $ 303,496 $ 268,439
Deferred revenue 87,852 45,572
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391,348 314,011
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Convertible notes 109,830 84,949
Shareholders' equity
Share capital 47,651,105 47,411,000
Warrants 1,027,114 1,027,114
Contributed surplus 2,985,834 2,854,038
Deficit (48,958,744) (48,216,880)
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2,705,309 3,075,272
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$ 3,206,487 $ 3,474,232
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Consolidated Statements of Operations, Comprehensive Loss and Deficit
(unaudited)
(Expressed in United States dollars under US GAAP)
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For the three For the three For the nine For the nine
months ended months ended months ended months ended
Sept 30, 2007 Sept 30, 2006 Sept 30, 2007 Sept 30, 2006
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REVENUE
Royalties and
license fees $ 618,131 $ 262,307 $ 1,890,999 $ 1,219,078
Product sales 54,163 79,380 183,685 226,547
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672,294 341,687 2,074,684 1,445,625
Cost of product
sales 15,167 8,065 71,337 12,888
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657,127 333,622 2,003,347 1,432,737
EXPENSES
Marketing 302,253 274,602 1,036,081 771,312
Operations 36,490 35,427 103,395 105,237
Product
engineering 200,063 199,682 548,062 629,196
Administration 264,405 234,079 846,670 719,600
Foreign
exchange loss
(gain) 915 (8,343) 1,106 564
Amortization 50,635 100,303 151,151 362,225
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854,761 835,750 2,686,465 2,588,134
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Loss before
other items (197,634) (502,128) (683,118) (1,155,397)
OTHER ITEMS
Interest income 16,168 23,722 59,812 55,998
Interest on
convertible
notes (20,794) (20,794) (61,705) (40,541)
Accretion
expense (8,361) (4,208) (24,882) (8,550)
Gain on
sale of
capital
assets - - 586 -
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(12,987) (1,280) (26,189) 6,907
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Loss before
taxes (210,621) (503,408) (709,307) (1,148,490)
Foreign
withholding tax (8,021) (18,954) (32,557) (34,068)
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Net loss for
period (218,642) (522,362) (741,864) (1,182,558)
Deficit,
beginning of
period (48,740,102) (47,195,401) (48,216,880) (46,535,205)
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Deficit, end of
period $(48,958,744) $(47,717,763) $(48,958,744) $(47,717,763)
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Loss per common
share (basic
and diluted) $ (0.02) $ (0.06) $ (0.08) $ (0.13)
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Consolidated Statements of Cash Flows
(unaudited)
(Expressed in United States dollars under United States GAAP)
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For the three For the three For the nine For the nine
months ended months ended months ended months ended
Sept 30, 2007 Sept 30, 2006 Sept 30, 2007 Sept 30, 2006
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Cash provided by
(used in)
OPERATIONS
Loss for the
period $ (218,642) $ (522,362) $ (741,864) $ (1,182,558)
Items not
requiring cash:
Amortization 50,635 100,303 151,151 362,225
Stock based
compensation 45,906 86,501 215,402 316,137
Accretion
expense 8,361 4,208 24,882 8,550
Gain on
sale of
capital assets - - (586) -
Other (355) (728) (1,722) (3,687) Changes in non-cash
working capital
balances (261,675) 140,530 (627,945) (135,710)
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(375,770) (191,548) (980,682) (635,043) FINANCING
Issuance of
common shares
(net) 59,644 43,820 156,499 781,782
Proceeds on
issuance of
convertible notes - - - 1,000,000
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59,644 43,820 156,499 1,781,782
INVESTMENTS
Note receivable - - 36,000 26,442
Purchase of
property and
equipment (4,545) (2,070) (13,912) (26,080)
Deferred
development
costs - - - (39,500)
Purchase of
intangible
assets (3,876) (6,541) (7,011) (22,547) Proceeds on
sale of
capital assets - - 586 -
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(8,421) (8,611) 15,663 (61,685)
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Decrease
(increase) in
cash and cash
equivalents (324,547) (156,339) (808,520) 1,085,054
Cash and cash
equivalents,
beginning of
period 1,832,503 2,464,122 2,316,476 1,222,729
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Cash and cash
equivalents, end
of period $ 1,507,956 $ 2,307,783 $ 1,507,956 $ 2,307,783
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For more information please contact:
Investor Relations
Paula Murray
QSound Labs, Inc.
+1-954-796-8798
paula.murray@qsound.com