QSound Labs Reports Fourth Quarter & Year End Results for 2003.Business Editors/High-Tech Writers CALGARY Calgary (kăl`gərē), city (1991 pop. 710,677), S Alta., Canada, at the confluence of the Bow and Elbow rivers. The largest city in Alberta and the fastest-growing major city in Canada, Calgary is a corporate, transportation, and financial , Alberta--(BUSINESS WIRE)--March 24, 2004 QSound Labs QSound Labs is primarily a developer and provider of audio enhancement technologies for entertainment and communications devices and software. The company is best known as a pioneer of 3D audio effects, beginning with speaker-targeted positional 3D technology applied to arcade , Inc. (NASDAQ NASDAQ in full National Association of Securities Dealers Automated Quotations U.S. market for over-the-counter securities. Established in 1971 by the National Association of Securities Dealers (NASD), NASDAQ is an automated quotation system that reports on :QSND), a leading developer of audio and voice software products, reported revenues for the three months ended December December: see month. 31, 2003 of $363,000 as compared to $1,290,000 for the same period in FY2002. The operating loss operating loss The excess of operating expenses over revenue. As with operating income, operating losses exclude revenues and expenses from operations that are not considered a regular part of the business. Also called deficit. Compare operating income. for the quarter was $(666,000) or $(0.09) per share as compared to an operating profit Operating profit (or loss) Revenue from a firm's regular activities less costs and expenses and before income deductions. operating profit See operating income. of $680,000 or $0.10 per share for the same period last year. After allowing for non-cash items such as depreciation and asset impairment Impairment 1. A reduction in a company's stated capital. 2. The total capital that is less than the par value of the company's capital stock. Notes: 1. This is usually reduced because of poorly estimated losses or gains. 2. charges, the net loss for the period was $(3,003,000) or $(0.42) per share as compared to net income of $453,000 or $0.06 per share for the same period in FY2002. Revenues for the year ended December 31, 2003 were $2,043,000 compared to $4,224,000 in FY2002. The operating loss was $(1,271,000) or $(0.17) per share in FY2003 and the operating profit was $1,672,000 or $0.23 per share in FY2002. Net loss for FY2003 was $(3,706,000) or $(0.52) per share as compared to net income of $1,129,000 or $0.16 per share in FY2002. The Company reported a working capital surplus of $2,143,000 at December 31, 2003 of which cash comprised $2,061,000. The asset impairment charge related primarily to the QCommerce business unit and represented a reduction in Goodwill previously capitalized Capitalized Recorded in asset accounts and then depreciated or amortized, as is appropriate for expenditures for items with useful lives longer than one year. when the Company acquired certain e-commerce e-commerce, commerce conducted over the Internet, most often via the World Wide Web. E-commerce can apply to purchases made through the Web or to business-to-business activities such as inventory transfers. businesses for equity in the late nineties. It has no cash effect on these or future financial statements. "2003 was a year of transition. Management focused all of its efforts on introducing a new generation of audio solutions to the mobile & PC markets as well as gaining a foothold foot·hold n. 1. A place providing support for the foot in climbing or standing. 2. A firm or secure position that provides a base for further advancement. foothold Noun 1. in the emerging VoIP market," stated David Gallagher
David Lee Gallagher (born February 9, 1985) is an American actor. He is perhaps best known for his role of Simon Camden on the television series 7th Heaven. , President of QSound Labs. "Each of these initiatives represent a tremendous opportunity for the Company to participate in growth opportunities, as detailed below." Mobile Market The Company introduced microQ in 2003 and by year-end year-end also year·end n. The end of a year. adj. Occurring or done at the end of the year: a year-end audit. Noun 1. had gained it's it's 1. Contraction of it is. 2. Contraction of it has. See Usage Note at its. it's it is or it has it's be ~have first design win, MiTAC's Mio 8390, which began shipping in early 2004. Also, by year-end, the Company had established relationships with two semiconductor companies, one as a microQ licensee licensee n. a person given a license by government or under private agreement. (See: license, licensor) LICENSEE. One to whom a license has been given. 1 M. Q. & S. 699 n. and the other as a co-marketing Co-marketing is a marketing practice where two companies cooperate with separate distribution channels, sometimes including profit sharing. It is frequently confused with Co-promotion See also Marketing co-operation agreement. 2004 will produce the first revenues from the microQ product line and management expects to complete several more contracts for design wins in early 2004. The industry outlook is exceptionally promising as these devices become "smarter", the demand for microQ-type solutions will increase. PC Market The Company has a long established relationship with Philips (company) Philips - A Dutch multinational electronics company. It produces washing machines, consumer electronics, integrated circuits and light bulbs. Together with Sony they set the Compact Disc standard, especially Green Book CD-ROM. and during 2003 continued to develop products for their distribution channels, specifically the Aurilium, an award winning external USB USB in full Universal Serial Bus Type of serial bus that allows peripheral devices (disks, modems, printers, digitizers, data gloves, etc.) to be easily connected to a computer. sound card . To date, this relationship has not returned material revenues but 2004 promises to improve upon the past. There are opportunities to bundle our QVE QVE Quintessential Vocal Ensemble (St. John's, Newfoundland, Canada) QVE Quality Value Engineering QVE Quasi-Vibrational Energy QVE Quinta Vale das Escadinhas (Silgueiros, Portugal wine producer) based products with other Philip's products, as evidenced by the recently announced bundle of USB powered speakers Powered speakers (or active speakers) are speakers that have built-in amplifiers. They can be connected directly to a mixing console or sound source, without the need for an amplifier. Such speakers are available with passive or active crossovers built into them. and Sound Agent 2, as well as opportunities to expand the distribution of the sound card product line. The overall industry outlook does not promise growth but the Company is well positioned since there is less competition to deal with in this market. VoIP Market The Company's focus in this market has been to identify niche opportunities that limit competition with the major industry players. To that extent, the focus has been on developing and marketing solutions to the small business segment. Initially this has been low-density low-den·si·ty adj. Having a low concentration: low-density urban areas. Adj. 1. low-density - having low relative density or specific gravity gateways and IP phones that provide solutions for this segment. In 2004, the maturation maturation /mat·u·ra·tion/ (mach-u-ra´shun) 1. the process of becoming mature. 2. attainment of emotional and intellectual maturity. 3. of the industry will require new products and solutions and the Company plans to augment aug·ment v. aug·ment·ed, aug·ment·ing, aug·ments v.tr. 1. To make (something already developed or well under way) greater, as in size, extent, or quantity: its current product line to meet these needs. Again, the industry outlook is promising as VoIP technology acceptance rate has increased dramatically in the past twelve months. Consumer Electronics Market This is the most competitive market for the Company. The Company continues to license technology to Toshiba Toshiba Corporation (株式会社東芝 Kabushiki-gaisha Tōshiba , Sanyo SANYO Three Oceans (Japanese, refers to Pacific, Atlantic, and Indian Oceans) , InterVideo & a number of large Chinese Chinese, subfamily of the Sino-Tibetan family of languages (see Sino-Tibetan languages), which is also sometimes grouped with the Tai, or Thai, languages in a Sinitic subfamily of the Sino-Tibetan language stock. OEMs and plans to add to this list in 2004. E-Commerce QCommerce revenues have declined over the past few years and for the future, no organic growth is expected. The Company has therefore taken a reduction in the related Goodwill asset, previously capitalized when the Company acquired certain e-commerce businesses for equity. This release contains forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. within the meaning of the Private Securities Litigation An action brought in court to enforce a particular right. The act or process of bringing a lawsuit in and of itself; a judicial contest; any dispute. When a person begins a civil lawsuit, the person enters into a process called 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 The two-way transmission of voice over a packet-switched IP network, which is part of the TCP/IP protocol suite. The terms "IP telephony" and "voice over IP" (VoIP) are synonymous. products, and ongoing licensing activities for QSound QSound is the original name for a positional three-dimensional (3D) sound processing algorithm from QSound Labs that creates 3D audio effects from multiple monophonic sources and sums the outputs to two channels for presentation over regular stereo speakers. 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 Another term for IP telephony and VoIP. In the late 1990s, some people made a distinction between Internet Telephony and VoIP: Internet telephony referred to voice over the public Internet, while VoIP referred to voice over private IP networks. 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 CIRCUMSTANCES, evidence. The particulars which accompany a fact. 2. The facts proved are either possible or impossible, ordinary and probable, or extraordinary and improbable, recent or ancient; they may have happened near us, or afar off; they are public or after the date hereof here·of adv. Of this. hereof Adverb Formal or law of or concerning this Adv. 1. hereof - of or concerning this; "the twigs hereof are physic" or to reflect the occurrence of unanticipated events.
QSound Labs, Inc.
Consolidated Balance Sheets
As at December 31, 2003 and December 31, 2002
(Expressed in United States dollars, prepared using US GAAP)
December 31, December 31,
2003 2002
(unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 2,061,093 $ 2,621,205
Accounts receivable 221,194 929,519
Inventory 107,377 16,455
Deposits and prepaid expenses 82,921 58,674
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2,472,585 3,625,853
Note receivable - 500,000
Capital assets 1,114,992 747,553
Goodwill - 2,184,589
Intangible assets 189,002 213,771
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$ 3,776,579 $ 7,271,766
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable and accrued liabilities $ 233,198 $ 220,894
Deferred revenue 96,547 120,511
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329,745 341,405
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Shareholders' equity:
Share capital (7,195,244 common shares) 44,310,198 44,088,094
Contributed surplus 1,114,316 1,114,316
Deficit (41,977,680) (38,272,049)
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3,446,834 6,930,361
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$ 3,776,579 $ 7,271,766
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QSound Labs, Inc.
Consolidated Statements of Operations and Deficit
For the periods ended December 31, 2003 and 2002
(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,
2003 2002 2003 2002
(unaudited) (unaudited) (unaudited) (unaudited)
REVENUE
Royalties and
license fees $ 88,109 $ 919,806 $ 779,396 $ 2,810,717
Product sales 275,154 370,451 1,263,692 1,413,594
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363,263 1,290,257 2,043,088 4,224,311
Cost of
product sales 136,075 79,210 419,837 271,530
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227,188 1,211,047 1,623,251 3,952,781
EXPENSES:
Marketing 435,094 225,554 1,301,890 895,820
Operations 52,637 42,498 174,558 235,201
Product
engineering 235,630 138,503 834,333 643,524
Administration 169,573 124,154 583,763 506,028
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892,934 530,709 2,894,544 2,280,573
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OPERATING
(LOSS) PROFIT (665,746) 680,338 (1,271,293) 1,672,208
OTHER ITEMS
Depreciation
and
amortization (71,089) (75,866) (308,717) (382,662)
Impairment of
assets (2,292,742) (100,000) (2,292,742) (100,000)
Funding of
past service
pension costs - (55,189) - (55,189)
Interest and
other income 7,011 10,535 41,164 29,833
Gain (loss) on
sale of
capital
assets 3,933 59 2,204 740
Other 15,560 (7,120) 123,753 (35,979)
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(2,337,327) (227,581) (2,434,338) (543,257)
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NET (LOSS)
INCOME FOR
PERIOD (3,003,073) 452,757 (3,705,631) 1,128,951
DEFICIT
BEGINNING OF
PERIOD (38,974,607) (38,724,807) (38,272,049) (39,401,001)
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DEFICIT END
OF PERIOD $(41,977,680) $(38,272,050) $(41,977,680) $(38,272,050)
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INCOME PER
COMMON SHARE $ (0.42) $ 0.06 $ (0.52) $ 0.16
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QSound Labs, Inc.
Consolidated Statements of Cash Flows
For the periods ended December 31, 2003 and 2002
(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,
2003 2002 2003 2002
(unaudited) (unaudited) (unaudited) (unaudited)
Cash provided
by (used in)
OPERATIONS
(Loss) income
for the
period $(3,003,073) $ 452,757 $(3,705,631) $ 1,128,951
Items not
requiring
(providing)
cash:
Depreciation
and
amortization 71,089 175,866 308,717 482,662
Impairment of
assets 2,292,742 - 2,292,742
Compensation
cost of
options
issued to
non-
employees 84,575 - 90,439 -
Loss (gain)
on sale of
capital
assets (3,933) (59) (2,204) (740)
Changes in
working
capital
balances 181,708 340,081 576,244 (423,054)
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(376,892) 968,645 (439,693) 1,187,819
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FINANCING
Issuance of
common
shares, net 11,298 39,685 22,940 39,685
--------------------------------------------------------------------
11,298 39,685 22,940 39,685
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INVESTMENTS
Purchase of
capital
assets (46,807) (2,595) (98,026) (113,879)
Purchase of
intangible
assets (15,215) (17,091) (51,394) (41,052)
Change in
working
capital for
investment
purposes - - - (500,000)
Proceeds from
sale of
capital
assets 260 59 6,061 740
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(61,762) (19,627) (143,359) (654,191)
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Increase
(decrease) in
cash (427,356) 988,703 (560,112) 573,313
Cash and cash
equivalents
beginning of
period 2,488,449 1,632,502 2,621,205 2,047,892
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Cash and cash
equivalents
end of period $ 2,061,093 $ 2,621,205 $ 2,061,093 $ 2,621,205
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