Press Release
QSound Labs Reports Third Quarter Results for 2004
Calgary, Alberta - November 2, 2004 -- QSound Labs, Inc. (NASDAQ: QSND), a leading developer of audio and voice software solutions, reported revenues for the three months ended September 30, 2004 of $600,000 as compared to $466,000 for the same period in FY2003. The operating loss for the quarter was $(174,000) or $(0.02) per share as compared to an operating loss of $(383,000) or $(0.05) 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 $(293,000) or $(0.03) per share as compared to $(464,000) or $(0.06) per share for the same period in FY2003.
Revenues for the nine months ended September 30, 2004 were $1,719,000 compared to $1,680,000 in FY2003. The operating loss was $(883,000) or $(0.11) per share in FY2004 and the operating loss was $(606,000) or $(0.09) per share in FY2003. Net loss for this period was $(1,216,000) or $(0.16) per share as compared to $(703,000) or $(0.10) per share in FY2003.
The Company reported a working capital surplus of $1,767,000 at September 30, 2004 of which cash comprised $1,503,000. The Company continued the trend of improving its quarterly operating cash flow, with a net operating cash outflow for the third quarter of $(62,000) compared to $(321,000) in the second quarter.
"During the quarter, we continued to make progress in penetrating the mobile market with our microQ product suite," stated David Gallagher, President and CEO of QSound Labs. "The Company added two more design wins to the previously announced microQ design wins with Broadcom and Qualcomm. Specifically, the Company completed license agreements with Vodafone for the inclusion of our 3D positional audio solution in their VFX reference design and, subsequent to the quarter ending, with PacketVideo for both the ringtone player and 3D positional audio components of microQ. These agreements reflect our strategy of addressing multiple distribution channels; namely chip manufacturers, OEM handset manufacturers and video software partners."
"With all of these agreements, the target for product delivery to the market place is throughout 2005. At this stage, management expects that recurring revenues from some of these contracts will commence in early 2005. The mobile market is in the early stages of multimedia adoption and usage. Advanced markets in Japan and Korea indicate that consumers are willing to pay for multimedia data services. Industry analysts are predicting the same consumer pattern to occur in the rest of the world thus providing a growth market for several years to come. Management believes the Company is currently well situated to take advantage of this opportunity. Competition will, of course, be fierce and it is critical that the Company continues to capitalize on its first to market advantage by closing more license agreements over the next few months."
"Revenues from our PC audio software solution, QVE, remained flat. The Company has continued to seek out new licensees to complement our main licensee, Philips Sound Solutions."
"VoIP product sales were also flat and will continue as such until new products
with a wider application, are available. This is still expected to occur in early FY2005."
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, product distribution through Philips, sales
of existing and new IP telephony products, and ongoing licensing activities
for QSound technologies. 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 September 30, 2004 and December 31, 2003
(Expressed in United States dollars, prepared using US GAAP)
September 30, December 31,
2004 2003
(unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 1,502,746 $ 2,061,093
Accounts receivable 449,466 221,194
Inventory 99,656 107,377
Deposits and prepaid expenses 75,839 82,921
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2,127,707 2,472,585
Capital assets 1,349,070 1,114,992
Intangible assets 176,083 189,002
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$ 3,652,860 $ 3,776,579
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable and accrued liabilities $ 229,178 $ 233,198
Deferred revenue 132,160 96,547
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361,338 329,745
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Shareholders' equity:
Share capital (7,885,824 common shares) 45,339,772 44,279,378
Contributed surplus 1,114,316 1,114,316
Deficit (43,162,566) (41,946,860)
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3,291,522 3,446,834
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$ 3,652,860 $ 3,776,579
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QSound Labs, Inc.
Consolidated Statements of Operations and Deficit
For the periods ended September 30, 2004 and 2003
(Expressed in United States dollars, prepared using US GAAP)
For three For three For six For six
months ended months ended months ended months ended
September 30, September 30, September 30, September 30,
2004 2003 2004 2003
(unaudited) (unaudited) (unaudited) (unaudited)
REVENUE
Royalties and
license fees $ 383,773 $ 114,879 $ 977,794 $ 691,287
Product sales 216,504 350,788 741,169 988,538
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600,277 465,667 1,718,963 1,679,825
Cost of
product sales 93,320 136,749 380,677 283,762
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506,957 328,918 1,338,286 1,396,063
EXPENSES:
Marketing 261,980 287,549 975,910 866,796
Operations 31,480 45,667 169,720 121,921
Product
engineering 219,691 244,753 680,254 598,703
Administration 167,717 133,723 395,521 414,190
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680,868 711,692 2,221,405 2,001,610
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OPERATING
(LOSS) PROFIT (173,911) (382,774) (883,119) (605,547)
OTHER ITEMS
Depreciation
and
amortization (101,433) (74,904) (311,085) (237,628)
Interest and
other income 2,843 11,031 7,068 34,153
Gain (loss) on
sale of
capital
assets (13,236) 179 (13,236) (1,729)
Other (6,887) (17,048) (15,334) 108,193
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(118,713) (80,742) (332,587) (97,011)
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NET (LOSS)
INCOME FOR
PERIOD (292,624) (463,516) (1,215,706) (702,558)
DEFICIT
BEGINNING OF
PERIOD (42,869,942) (38,511,091) (41,946,860) (38,272,049)
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DEFICIT END
OF PERIOD $(43,162,566) $(38,974,607) $(43,162,566) $(38,974,607)
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INCOME PER
COMMON SHARE $ (0.03) $ (0.06) $ (0.16) $ (0.10)
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QSound Labs, Inc.
Consolidated Statements of Cash Flows
For the periods ended September 30, 2004 and 2003
(Expressed in United States dollars, prepared using US GAAP)
For three For three For six For six
months ended months ended months ended months ended
September 30, September 30, September 30, September 30,
2004 2003 2004 2003
(unaudited) (unaudited) (unaudited) (unaudited)
Cash provided
by (used in)
OPERATIONS
(Loss) income
for the
period $ (292,624) $ (463,516) $(1,215,706) $ (702,558)
Items not
requiring
(providing)
cash:
Depreciation
and
amortization 101,433 74,904 311,085 237,628
Provision for
inventory - - 60,000 -
Compensation
cost of
options
issued to
non-
employees - - - 5,864
Loss (gain)
on sale of
capital
assets 13,236 - 13,236 -
Changes in
working
capital
balances 116,132 (154,109) (241,876) 394,536
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(61,823) (542,721) (1,073,261) (62,622)
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FINANCING
Issuance of
common
shares, net 68,099 1,645 1,022,775 11,642
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68,099 1,645 1,022,775 11,642
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INVESTMENTS
Purchase of
capital
assets (227,704) (40,989) (468,792) (10,409)
Purchase of
intangible
assets (29,597) (11,902) (39,261) (36,179)
Proceeds from
sale of
capital
assets 140 179 192 5,801
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(257,161) (52,712) (507,861) (81,776)
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Increase
(decrease) in
cash (250,885) (593,788) (558,347) (132,756)
Cash and cash
equivalents
beginning of
period 1,753,631 3,082,237 2,061,093 2,621,205
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Cash and cash
equivalents
end of period $ 1,502,746 $ 2,488,449 $ 1,502,746 $ 2,488,449
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/T/