Press Release

 

 

QSound Labs Reports Fourth Quarter
and Year End Results for 2004

 

 

Calgary, Alberta – March 1, 2005 -- QSound Labs, Inc. (NASDAQ: QSND), a leading developer of audio and voice software solutions, today reported financial results for its fourth quarter and year ended December 31, 2004. For the three months ended December 31, 2004, the consolidated revenues were $494,000 as compared to $363,000 for the same quarter in FY2003. The net loss for the fourth quarter was $(448,000) or $(0.05) per share as compared to $(3,003,000) or $(0.41) per share for the same period in FY2003.

 

Consolidated revenues for the year ended December 31, 2004 were $2,213,000 compared to $2,043,000 in FY2003. Net loss for this year was $(1,926,000) or $(0.25) per share as compared to $(3,706,000) or $(0.52) per share in FY2003.

 

The Company reported a working capital surplus of approximately $3.5 million at December 31, 2004 of which cash comprised $3,328,000. This increase from the third quarter was as a direct result of a $2 million private placement concluded with a single investor in December.

 

Fiscal 2004 Review:
"In FY2004, the Company completed 16 OEM and semiconductor license agreements and 3 partner agreements for its audio software solutions," stated David Gallagher, President and CEO of QSound Labs. "This is noteworthy in that it is a significant increase in activity when compared to recent years. The majority of these contracts are for the Company’s microQ™ solution for the mobile device marketplace and are comprised of royalty revenues plus an upfront fee to recover initial engineering costs. Revenues in FY2004 do not reflect the long term benefits of these royalty streams but do include most of the engineering fees. To date, 7 of these design wins have been announced, including Qualcomm, Broadcom, VIA and Sony VAIO as well as the partnerships with Vodafone and Samsung. The remainder will be announced when the relevant products are ready for market introduction."

 

"With respect to the PC market, the Company has successfully refocused its efforts and, as a result, signed new license agreements with VIA Technologies, Ego Systems and Sony VAIO."

 

"Although our VoIP product sales were flat we remain optimistic that new products, currently under development, will bring growth to this business unit in the later half of 2005."

 

Outlook:
"Consumer product introduction by our licensees can take as long as 18 months from license completion and the Company can only control its portion of the deliverables. Consequently, it is difficult to predict when the full financial benefits of these concluded agreements will occur. It is clear that the expectation of significant increases in the Company’s recurring revenue base is later in FY 2005 than management had previously anticipated."

 

"Expenses are easier to predict. In FY 2005 expenses will be similar to what they were in FY 2004 except for the estimated increase in adopting corporate governance provisions as prescribed by Sarbanes-Oxley. This could represent an increase in administrative expenses of $150,000."

"In FY 2003 the Company adopted the policy of expensing employee and director stock options. In FY 2004 this totaled $320,000 and is mostly included in administrative expenses. It is difficult to predict this amount for FY 2005 but management expects this amount to be smaller, thus potentially offsetting the increase in corporate governance costs."

"For FY 2005, the Company intends to continue pursing the microQ opportunities that are clearly available in the growing mobile and handheld market and build upon the momentum from contracts negotiated in 2004. These opportunities together with the introduction of new QTelNet products and the continued policy of cost containment will be the basis for future growth."


This release contains forward-looking statements within the meaning of the Private Securities Litigation Act of 1995 concerning, among other things, expectation in 2005 of revenues from existing audio design wins, new microQ licenses and sales of new VoIP products, and little or no increase in expenses. 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 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, continued growth of multimedia usage in the mobile devices market 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 December 30, 2004 and December 31, 2003
(Expressed in United States dollars, prepared using US GAAP)

                                           December 31,  December 31,
                                                  2004          2003

ASSETS
Current assets:
 Cash and cash equivalents                 $ 3,327,543   $ 2,061,093
 Accounts receivable                           210,967       221,194
 Inventory                                     162,568       107,377
 Deposits and prepaid expenses                  61,438        82,921
---------------------------------------------------------------------
                                             3,762,516     2,472,585


Capital assets                               1,302,598     1,114,992
Intangible assets                              162,720       189,002
---------------------------------------------------------------------

                                           $ 5,227,834   $ 3,776,579
---------------------------------------------------------------------
---------------------------------------------------------------------

LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
 Accounts payable and accrued liabilities  $   245,664   $   233,198
 Deferred revenue                               59,745        96,547
---------------------------------------------------------------------
                                               305,409       329,745
---------------------------------------------------------------------
---------------------------------------------------------------------

Shareholders' equity:
 Share capital (8,404,085 common shares)    45,994,584    44,003,303
 Warrants                                    1,502,331       217,450
 Contributed surplus                         1,329,136     1,203,761
 Deficit                                   (43,903,626)  (41,977,680)
---------------------------------------------------------------------
                                             4,922,425     3,446,834
---------------------------------------------------------------------

                                           $ 5,227,834   $ 3,776,579
---------------------------------------------------------------------
---------------------------------------------------------------------


QSound Labs, Inc.
Consolidated Statements of Operations and Deficit
For the periods ended December 31, 2004 and 2003
(Expressed in United States dollars, prepared using US GAAP)

                 For three     For three       For the       For the
              months ended  months ended    year ended    year ended
               December 31,  December 31,  December 31,  December 31,
                      2004          2003          2004          2003
                (unaudited)   (unaudited)
REVENUE
 Royalties and
  license fees  $  184,509    $   88,109   $ 1,162,303   $   779,396
 Product sales     309,706       275,154     1,050,875     1,263,692
---------------------------------------------------------------------
                   494,215       363,263     2,213,178     2,043,088
 Cost of
  product sales     38,613       136,075       419,290       419,837
---------------------------------------------------------------------
                   455,602       227,188     1,793,888     1,623,251
EXPENSES:
 Marketing         268,806       435,094     1,251,695     1,301,890
 Operations         68,966        52,637       240,691       174,558
 Product
  engineering      263,542       235,630       962,340       834,333
 Administration    173,404       169,488       800,611       578,805
 Foreign
  exchange loss     38,936            85        41,955         4,958
 Depreciation and
  amortization     146,487        71,089       457,572       308,717
 Impairment
  of assets              -       108,154             -       108,154
 Impairment of
  goodwill               -     2,184,589             -     2,184,589
---------------------------------------------------------------------
                   960,141     3,256,766     3,754,864     5,496,004

---------------------------------------------------------------------
OPERATING
 (LOSS) PROFIT    (504,539)   (3,029,578)   (1,960,976)   (3,872,753)

OTHER ITEMS
 Interest and
  other income      71,659         7,011        78,727        41,164
 Gain (loss) on
  sale of capital
  assets            (2,380)        3,933       (15,616)        2,204
 Other             (12,747)       15,561       (28,081)      123,754
---------------------------------------------------------------------
                    56,532        26,505        35,030       167,122

---------------------------------------------------------------------
NET (LOSS)
 INCOME FOR
 PERIOD           (448,007)   (3,003,073)   (1,925,946)   (3,705,631)
DEFICIT
 BEGINNING
 OF PERIOD     (43,455,619)  (38,974,607)  (41,977,680)  (38,272,049)
---------------------------------------------------------------------
DEFICIT END
 OF PERIOD    $(43,903,626) $(41,977,680) $(43,903,626) $(41,977,680)
---------------------------------------------------------------------
---------------------------------------------------------------------

INCOME PER
 COMMON SHARE $      (0.05) $      (0.41) $      (0.25) $      (0.52)
---------------------------------------------------------------------
---------------------------------------------------------------------


QSound Labs, Inc.
Consolidated Statements of Cash Flows
For the periods ended December 31, 2004 and 2003
(Expressed in United States dollars, prepared using US GAAP)

                 For three     For three       For the       For the
              months ended  months ended    year ended    year ended
               December 31,  December 31,  December 31,  December 31,
                      2004          2003          2004          2003
                (unaudited)   (unaudited)   (unaudited)   (unaudited)

Cash provided
 by (used in)

OPERATIONS
 (Loss) Income
 for the period $ (448,007)  $(3,003,073)  $(1,925,946) $ (3,705,631)
 Items not
  requiring
  (providing)
  cash:
  Depreciation
   and
   amortization    146,487        71,089       457,572       308,717
  Impairment
   of assets             -       108,154             -       108,154
  Impairment
   of goodwill           -     2,184,589             -     2,184,589
  Compensation
   cost of
   options issued   58,199        84,575       320,432        90,439
  Loss (gain) on
   sale of capital
   assets            2,380        (3,933)       15,616        (2,204)
  Changes in
   working capital
   balances        134,059       181,707       (47,817)      576,243
---------------------------------------------------------------------
                  (106,882)     (376,892)   (1,180,143)     (439,693)

FINANCING
 Issuance of
  common shares,
  net            1,097,882        11,298     2,120,657        22,940
 Issuance of
  warrants         904,019             -       904,019             -
---------------------------------------------------------------------
                 2,001,901        11,298     3,024,676        22,940

INVESTMENTS
 Purchase of
  capital assets   (67,688)      (46,807)     (536,480)      (98,026)
 Purchase of
  intangible
  assets            (6,772)      (15,215)      (46,033)      (51,394)
 Proceeds from
  sale of capital
  assets             4,238           260         4,430         6,061
---------------------------------------------------------------------
                   (70,222)      (61,762)     (578,083)     (143,359)

---------------------------------------------------------------------
Increase
 (decrease)
 in cash         1,824,797      (427,356)    1,266,450      (560,112)
Cash and cash
 equivalents
 beginning of
 period          1,502,746     2,488,449     2,061,093     2,621,205
---------------------------------------------------------------------
---------------------------------------------------------------------

Cash and cash
 equivalents
 end of period $ 3,327,543   $ 2,061,093   $ 3,327,543   $ 2,061,093
---------------------------------------------------------------------
---------------------------------------------------------------------

Notes:

1. Certain comparative information has been reclassified to conform
   with the current year's presentation.
2. This release reflects prospective adoption SFAS No. 123,
   "Accounting for Stock-Based Compensation" as of January 1, 2003

/T/

 

 

 

 

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