Press Release
QSound Labs Reports First Quarter Results for 2009
Calgary, Alberta, June 10, 2009 -- For the quarter ending March 31, 2009 consolidated revenues were $701,000 as compared to $423,000 for the corresponding quarter in 2008, an increase of 66% and an increase of 40% versus the preceding quarter. The net loss for the first quarter was $(46,000) or $(0.00) per share as compared to $(572,000) or $(0.06) per share in FY2008.
Revenues were higher than expected as a result of booking a one-time non-recurring license fee totaling $175,000 during the quarter. The cost containment program launched in late 2008 has significantly reduced expenses. Additional measures were introduced during the first quarter of 2009, so the full effect of this cost containment program will not be evident until the second quarter. Cash was used during the quarter to reduce long term debt by $114,000 and acquire software rights totalling $45,000. This resulted in a cash position decrease which has been more than offset by receivable collections of approximately $400,000 made subsequent to the quarter end.
First Quarter Highlights
- LG phone models featuring both mQSynth and mQFx technology from QSound previously released in late 2008 continued to sell well during the First Quarter. In particular, LG’s KS360 and the Cookie KP500 models have been popular.
- LG introduced three new cell phone models with QSound’s technology during the quarter. These included the KS660, the Cookie KP570Q and the Neon TE365 models. The KP570Q is the Cookie for Central and South American countries.
- QSound's relationship with Pantech continued with the launch of Pantech's Matrix Pro for AT&T in February of 2009.
- Toshiba continued to use QSound’s technology in their previously announced 40” inch and 46” LCD TVs. This licensing relationship has continued with the use of QSound’s QSurround and QXpander software in new versions of the Toshiba 40” and 46” LCD TV models for 2009.
- QSound’s Ripp3D engine continues selling through Verizon in the Guitar Hero World Tour mobile game.
- QSound’s Ripp3D engine is used in games available for download in the widely anticipated Zeebo video game console currently launching in Brazil. Zeebo is a joint venture between Qualcomm and Tectoy and targets the middle income market in Brazil using competitive pricing and a novel downloadable game model. QSound’s Ripp3D graphics engine is licensed for use in the game “Prey Evil” that all Zeebo purchasers are entitled to freely download and will result in a royalty payment to QSound for each Zeebo game console sold in Brazil. Zeebo’s online game library will also contain three additional Ripp3D engine games including a different version of Prey and Duke Nukem. Each of the three games in Zeebo’s library yield royalties to QSound when purchased. According to industry estimates, the Zeebo is anticipated to launch in Mexico in late 2009, and in India and other South American countries in 2010. Future launches in China and Russia are also anticipated.
- The Company continues to evaluate new opportunities with the award winning Ripp3D engine in both mobile gaming devices and phones and for its newly released QVoice technology.
This release contains forward-looking statements within the meaning of the Private Securities Litigation Act of 1995 concerning, among other things, effect of the cost containment program, royalty payments from Zeebo game consoles and games, and launches of Zeebo in various countries. 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 cost containment, 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 March 31, 2009 and December 31, 2008 (unaudited)
(Expressed in United States dollars under United States GAAP)
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March 31, 2009 December 31, 2008
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ASSETS
Current assets
Cash and cash equivalents $ 257,218 $ 408,332
Accounts receivable (net) 676,804 521,720
Deposits and prepaid expenses 117,868 136,935
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1,051,890 1,066,987 ---------------------------------------------------------------------
Property and equipment 178,309 192,251
Deferred development costs 235,620 205,457
Intangible assets 2,562,667 2,713,407
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$ 4,028,486 $ 4,178,102
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable and
accrued liabilities $ 205,380 $ 196,393 Current portion of long term debt 29,797 44,000
Deferred revenue 263,025 326,840
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498,202 567,233
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Pension benefit liability 116,382 106,129
Note payable 1,494,508 1,573,703
Convertible loan 1,000,000 1,000,000 Debt discount (751,992) (795,571) --------------------------------------------------------------------- 2,357,100 2,451,494 ---------------------------------------------------------------------
Shareholders' equity
Share capital 48,261,338 48,250,672
Warrants 2,386,741 2,386,741
Contributed surplus 2,942,758 2,962,983
Deficit (51,734,484) (51,688,744)
Accumulated other comprehensive income(loss) (184,967) (185,044)
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1,671,386 1,726,608
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$ 4,028,486 $ 4,178,102
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Consolidated Statements of Operations and Deficit
For the three months ended March 31, 2009 and 2008 (unaudited)
(Expressed in United States dollars under United States GAAP)
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2009 2008
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REVENUE
Royalties and license fees $ 652,392 $ 371,078
Product sales 48,800 52,330
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701,192 423,408 ---------------------------------------------------------------------
Cost of product sales 15,534 17,025
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685,658 406,383 ---------------------------------------------------------------------
EXPENSES
Marketing 183,601 288,036
Operations 25,794 34,023
Product engineering 122,421 268,343
Administration 129,761 308,403
Foreign exchange loss(gain) 6,043 1,946
Depreciation and amortization 179,976 41,559
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647,596 942,310
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PROFIT(LOSS) before other items 38,062 (535,927)
OTHER ITEMS
Interest income 385 6,956
Interest (28,628) (18,075)
Accretion of debt discount (43,577) (19,069) Gain on sale of capital assets 60 -
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(71,760) (30,188)
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Loss before taxes (33,698) (566,115)
Foreign withholding tax (12,042) (5,989)
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NET LOSS FOR THE PERIOD (45,740) (572,104) ---------------------------------------------------------------------
DEFICIT, BEGINNING OF PERIOD (51,688,744) (49,479,722)
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DEFICIT, END OF PERIOD $(51,734,484) $(50,051,826)
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INCOME PER COMMON SHARE $ (0.00) $ (0.06)
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Consolidated Statements of Cash Flows
For the three months ended March 31, 2009 and 2008 (unaudited)
(Expressed in United States dollars under United States GAAP)
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2009 2008
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Cash provided by(used in)
OPERATIONS
Income for the period $ (45,740) $ (572,104)
Items not requiring(providing) cash
Depreciation and amortization 179,976 41,559
Employee future benefits - (17,528)
Accretion of debt discount 43,577 19,069
Imputed interest on loan 20,616 - Stock based compensation (20,225) 27,012 Gain on sale of capital assets (60) - Other - (347)
Changes in working
capital balances (180,513) 228,556
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(2,369) (273,783) ---------------------------------------------------------------------
FINANCING
Issuance of common shares, net 10,666 - Note payable (114,013) -
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(103,347) - ---------------------------------------------------------------------
INVESTMENTS
Note receivable - 3,000
Purchase of property and equipment - (8,785) Purchase of deferred development costs (45,000) -
Purchase of intangible assets (478) (3,948) Proceeds from sale of capital assets 80 -
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(45,398) (9,733)
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Increase(decrease) in cash (151,114) (283,516)
Cash and cash equivalents,
beginning of period 408,332 1,232,255
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Cash and cash equivalents,
end of period $ 257,218 $ 948,739
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