Press Release

 

 

QSound Labs Reports Year End 2000 and Fourth Quarter Results

 

 

Calgary, Alberta - February 26, 2001 - QSound Labs, Inc. (NASDAQ: QSND) a leading developer of audio, e-commerce and multimedia software products, today reported FY2000 revenue of $4.5 million, up 23% from $3.6 million in 1999 and fourth quarter revenue of $1.2 million, up 5% from $1.1 million in the fourth quarter of 1999, and approximately flat with the third quarter of 2000.

For FY2000, operating profit was $126,000 or $0.01 per share compared to a loss of $(371,000) or $(0.02) per share in 1999. For the fourth quarter, the operating profit was $188,000 or $0.01 per share as compared to $67,000 or $0.00 per share in 1999. Including acquisition-related costs, in accordance with generally accepted accounting principles, the net loss for FY2000 was $7.7 million as compared to $1.9 million in 1999. Acquisition related costs, totaling $6.1 million in FY2000, consist of one time write-offs of purchased in-process research and development and asset impairment, ongoing amortization of goodwill and other acquisition-related intangibles and costs.

"The audio business segment reported its fifth consecutive quarterly operating profit," stated David Gallagher, CEO and President of QSound Labs. "This continuing trend coupled with our positive working capital situation and evolving repositioning of QCommerce activities provides an excellent base for continued growth in FY2001."

Outlook:
Looking forward to FY2001, the Company expects the audio business segment to achieve minimum overall revenue growth of 25% from its OEM and Downloadable Software Product activities.

 

  • Growth in the PC/Multimedia OEM market, will be driven by Philips' marketing and sales activities for their current soundcard product line. Recently introduced as their high-end offering in the product line, Philips' Acoustic Edge has received critical acclaim and several editors' choice awards from the media. The company continues to work with Philips on defining additional features and technology development for the next generation of soundcards to be released later this year.

  • It is expected that growth from the Consumer Electronics' OEM market will be flat for FY2001.

  • Revenue from Starkey Laboratories is expected to increase as digital hearing aid sales continue to grow. Additionally, higher royalty rates will become effective during the first quarter of FY2001.

  • Downloadable software sales are expected to grow this year as newly developed products are made available through partner Web sites and the Company's affiliate program. Our strategic relationship with RealNetworks (NASDQ: RNWK) will provide a solid foundation to achieve these goals.

 

Moving into FY 2001, QCommerce will benefit from changes made in the second half of last year. While overall revenue growth will be nominal for FY2001, it will be subscription based and consequently, recurring, as compared to FY2000 when the majority of the revenue base was comprised of one time payments. As well, the cost necessary to support the new revenue model will be significantly lower than in FY2000 and all steps have now been taken to establish the new infrastructure. Given the uncertainty generated by the changed perception of the e-commerce environment, the Company is expecting the QCommerce Business Unit to break even in FY2001 and has reason to believe in potential upside. There is now less competition, more traditional vendor-supplier relationships and a very large market to exploit.


This release contains forward-looking statements within the meaning of the Private Securities Litigation Act of 1995 concerning, among other things, future financial results. Investors are cautioned that such forward-looking statements involve risk and uncertainties, which could cause actual results, performance or achievements of the Company, 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 the Company's ability to carry out its business strategy and marketing plans, including availability of sufficient resources for the Company to do so timely and cost effectively, commercialization of the Company's technologies, consumer acceptance of the Company's products and services, dependence on the performance of third parties who have licensed the Company's technologies, manufacturing uncertainties, uncertainties relating to product development and commercial introduction, dependence on intellectual property, rapid technological change and competition, continued growth of the Internet and other risks that may be detailed from time to time in the Company's filings with the Securities and Exchange Commission. Forward-looking statements are based on the current expectations, projections and opinions of the Company's management, and the Company 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        
Unaudited        
As at December 31, 2000 and 1999        
(Expressed in United States Dollars under United States GAAP)
--------------------------------------------------------------------
                                   Dec. 31, 2000      Dec. 31, 1999
--------------------------------------------------------------------
Assets        
Current assets:        
Cash and cash equivalents           $  2,264,639       $  1,524,363
Accounts receivable                    1,166,941          1,090,049 
Inventory                                 48,431            215,471 
Deposits and prepaid expenses            108,752            335,575 
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                                       3,588,763          3,165,458 
        
Investments                              267,557          1,374,800 
Capital assets                         1,071,618          1,053,231 
Intangible assets                      4,573,946          4,507,754 

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                                    $  9,501,884      $  10,101,243 
--------------------------------------------------------------------
--------------------------------------------------------------------
        
Liabilities and Shareholders' Equity      
Current liabilities:        
Accounts payable                    $     254,102     $     510,129 
Accrued liabilities                     1,723,763            57,434 
Deferred revenue                            9,253           928,118 
--------------------------------------------------------------------
                                        1,987,118         1,495,681 
        
Long-term debt                            625,000                 - 
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                                        2,612,118         1,495,681 
        
Shareholders' equity         
Share capital (29,307,057 common
 shares)                               45,484,800        39,837,521 
Deficit                               (38,443,091)      (30,861,059)
Accumulated other comprehensive
 income                                  (151,943)         (370,900)
--------------------------------------------------------------------
                                        6,889,766         8,605,562 
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                                    $   9,501,884     $  10,101,243 
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--------------------------------------------------------------------
        

QSOUND LABS, INC.        
Consolidated Statements of Operations and Deficit       
Unaudited        
(Expressed in United States Dollars under United States GAAP)      
--------------------------------------------------------------------
                    For three    For three     For the     For the
                    months       months        year        year 
                    ended        ended         ended       ended 
                    Dec. 31,     Dec. 31,      Dec. 31,    Dec. 31,
                    2000         1999          2000        1999
--------------------------------------------------------------------
                
REVENUE        
Royalties, license
 fees and product
 sales            $ 1,233,374  $ 1,179,577  $ 4,469,002  $ 3,625,623
Cost of product
 sales                 59,395      117,291      208,298      359,613 
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                    1,173,979    1,062,286    4,260,704    3,266,010 
        
EXPENSES        
Marketing             467,545      481,296    1,735,698    1,630,674 
Product engineering   305,457      373,861    1,610,436    1,444,389 
Administration        212,920      139,743      788,567      561,583 
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                      985,922      994,900    4,134,701    3,636,646
        
--------------------------------------------------------------------
OPERATING PROFIT
 (LOSS)               188,057       67,386      126,003     (370,636)
        
OTHER ITEMS        
Depreciation and
 amortization      (1,125,146)    (857,801)  (2,535,856)    (543,729)
Impairment of
 assets            (3,317,048)               (3,317,048)           - 
Interest and other
 income                34,108       16,305      154,788       73,116 
Gain (loss) on sale
 of assets            (34,889)       3,214      (34,634)      23,714 
Write-off of acquired
 in-process research
 and development          985            -     (445,654)  (1,489,460)
Investment
 write-down          (840,568)           -   (1,290,568)           - 
Foreign exchange
 (loss)                (7,851)     (14,195)     (14,015)      (5,448)
Other                 (43,578)           -     (225,048)           - 
--------------------------------------------------------------------
                   (5,333,987)    (852,477)  (7,708,035)  (1,941,807)
        
--------------------------------------------------------------------
NET INCOME (LOSS)
 FOR PERIOD        (5,145,930)    (785,091)  (7,582,032)  (2,312,443)
        
DEFICIT BEGINNING
 OF PERIOD        (33,297,161) (30,075,968) (30,861,059) (28,548,616)
                 
--------------------------------------------------------------------
DEFICIT END OF
 PERIOD         $(38,443,091) $(30,861,059)$(38,443,091)$(30,861,059)
--------------------------------------------------------------------
--------------------------------------------------------------------
        
INCOME (LOSS) PER
 COMMON SHARE
 UNDER UNITED
 STATES GAPP    $      (0.18) $      (0.01)$      (0.27)$      (0.09)


QSOUND LABS, INC.        
Consolidated Statements of Cash Flows        
Unaudited        
(Expressed in United States Dollars under United States GAAP)      
--------------------------------------------------------------------
                    For three    For three     For the     For the
                    months       months        year        year 
                    ended        ended         ended       ended 
                    Dec. 31,     Dec. 31,      Dec. 31,    Dec. 31,
                    2000         1999          2000        1999
--------------------------------------------------------------------

Cash provided by (used in):        
        
Operations:        
Net loss for the
 year             $ (5,145,930) $ (102,948) $ (7,582,032) $ (902,012)
Items not requiring
 (providing) cash:        
  Depreciation and
   amortization      1,125,146     229,657     2,535,856     632,387
  Impairment of
   assets            3,317,048           -     3,317,048           - 
  Gain on sale of
   capital assets       34,889      (3,214)       34,634     (23,714)
  Write down of
   investment          840,568           -     1,290,568           - 
  Write-off of
   acquired in-process
   research and
   development         (31,153)          -       415,486           - 
Changes in working
 capital balances     (267,075)   (664,043)      808,408   1,377,964
--------------------------------------------------------------------
                      (126,507)   (540,548)      819,968   1,084,625 

Issuance of shares (net)     -     672,401     2,604,243   1,918,844 
Increase (decrease) in
 long-term liability  (375,000)          -       625,000     150,340 
--------------------------------------------------------------------
                      (375,000)    672,401     3,229,243   2,069,184 
        
Purchase of capital
 assets                (78,082)   (399,091)     (529,863)   (687,482)
Purchase of intangible
 assets                269,985     (14,411)   (2,808,085) (1,345,591)
Proceeds from sale of
 capital assets          5,120       3,214         5,375      23,714 
Proceeds from sale of
 other assets           23,638           -        23,638  (1,745,700)
--------------------------------------------------------------------
                       220,661    (410,288)   (3,308,935) (3,755,059)
        
--------------------------------------------------------------------
Increase (decrease)
 in Cash              (280,846)   (278,435)      740,276    (601,250)
        
Cash and cash
 equivalents,
 beginning of
 period              2,545,485   1,802,798     1,524,363   2,125,613
        
--------------------------------------------------------------------
Cash and cash
 equivalents,
 end of period     $ 2,264,639 $ 1,524,363   $ 2,264,639 $ 1,524,363
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/T/

 

 

 

 

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