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| CALGARY, Alberta--(BUSINESS
WIRE)--Aug. 10, 2000--QSound Labs, Inc. (NASDAQ:QSND) reported second quarter revenues of
$1,199,000, up 53% from the same quarter in 1999 and 44% sequentially. For the second quarter, operating profit was $102,000 as compared to a loss of $247,000 in 1999. Net loss for the quarter, after deducting acquisition-related costs of $795,000 in accordance with generally accepted accounting principles, was $1,099,000 or $ (0.04) per share as compared to $302,000 or $ (0.01) per share in 1999. Acquisition related-costs in the second quarter included a one-time charge of $447,000 for purchased, in-process research and development. Other one-time charges include: costs incurred regarding the cancelled Stream Magic acquisition, restructuring costs, and an investment write-down totaling $358,000. Revenues for the six months ended June 30, 2000 were $2,034,000 compared to $1,586,000 for the same period in 1999. The operating loss was $169,000 as compared to $220,000 in 1999. Net loss for the six month period, which includes one-time charges of $830,000, was $1,618,000 or $ (0.06) per share as compared to a net loss of $298,000 or $ (0.01), which had no such charges, for the comparable period in 1999. ``Our audio division was profitable for the second quarter in a row and we are on track to meet management's expectations for FY2000,'' stated David Gallagher, President and CEO, QSound Labs. ``Both our QSound and QCommerce business units are well positioned for future growth.'' During the second quarter, the Company:
BUSINESS OUTLOOK The following statements are based on current expectation. These statements are forward-looking and actual results may differ materially. Management anticipates continued revenue growth for the QSound Business Unit in the second half of FY2000 based on the following expectations:
For the QCommerce Business Unit, management expects the following to be key growth drivers in the second half of FY2000:
Subsequent to the end of the second quarter, the Company has repurchased common shares under the ongoing program, previously announced. About QSound Labs, Inc. QSound Labs, Inc., founded in 1988, is a world leader in audio technology, multimedia software, Internet audio and e-commerce solutions. Utilizing its proprietary patented technology, the Company has developed audio solutions for virtual surround sound, positional audio, stereo enhancement and the Company's area of specialty - 3D audio. QSound's cutting-edge 3D audio technology allows consumers to enjoy high quality, realistic three-dimensional stereo surround sound in a number of applications with just two speakers. In recent years, QSound has leveraged its extensive Internet marketing expertise by also providing e-commerce solutions and complimentary multimedia software applications. The Company's various technologies are incorporated into many products in the consumer electronics, multimedia PC, Internet, entertainment and healthcare markets. Visit the QSound Labs web site at www.qsound.com for more information. 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, dependence on intellectual property,
uncertainties relating to product development and commercial introduction, rapid
technological change and competition, manufacturing uncertainties and other risks detailed
from time to time in the Company's periodic reports filed 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. QSOUND LABS, INC.
CONSOLIDATED BALANCE SHEETS
As at June 30, 2000 and 1999
Unaudited
(Expressed in United States Dollars
under United States GAAP) June 30, 2000 June 30, 1999
--------------------------------------------------------------
ASSETS
Current assets:
Cash and cash equivalents $ 3,242,405 $ 1,604,557
Accounts receivable 1,322,349 1,565,917
Inventory 143,075 220,461
Deposits and prepaid expenses 118,746 148,699
--------------------------------------------------------------
4,826,575 3,539,634
INVESTMENTS 1,124,800 -
CAPITAL ASSETS 1,367,792 1,327,765
INTANGIBLE ASSETS 9,094,124 319,510
--------------------------------------------------------------
$16,413,291 $ 5,186,909
--------------------------------------------------------------
--------------------------------------------------------------
LIABILITES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 434,919 $ 303,554
Accrued liabilities 1,626,770 35,508
Deferred revenue 613,631 -
--------------------------------------------------------------
2,675,320 339,062
Long-term liability 1,500,000 -
--------------------------------------------------------------
4,175,320 339,062
--------------------------------------------------------------
Shareholders' equity:
Common shares
(29,131,671 common shares) 45,088,204 33,502,286
Deficit (32,479,333) (28,654,439)
Accumulated other
comprehensive income (370,900)
--------------------------------------------------------------
12,237,971 4,847,847
--------------------------------------------------------------
$16,413,291 $ 5,186,909
--------------------------------------------------------------
--------------------------------------------------------------
QSOUND LABS INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Six Month Periods Ended
June 30, 2000 and 1999
Unaudited For three For three
(Expressed in United States months ended months ended
Dollars under United States GAAP) June 30, 2000 June 30, 1999
--------------------------------------------------------------
Cash provided by (used in)
Operations
Income (loss) for the period $(1,098,688) $ (302,061)
Items not requiring
(providing) cash:
Depreciation and amortization 403,097 74,240
Gain on sale of capital assets - (5,500)
Write-off of acquired in-process
research and development 446,639
Investment write-down 250,000
Options granted for services - 64,000
Changes in working capital
balances 1,474,443 258,999
--------------------------------------------------------------
1,475,491 89,678
--------------------------------------------------------------
Financing
Issuance of shares, net (14,791) 294,768
Increase in long-term liability 1,500,000
--------------------------------------------------------------
1,485,209 294,768
--------------------------------------------------------------
Investments
Purchase of capital assets (434,571) (69,677)
Purchase of intangible assets (3,053,004) -
Purchase of other assets - (478,688)
Proceeds from sale of capital assets - 5,500
--------------------------------------------------------------
(3,487,575) (542,865)
--------------------------------------------------------------
Increase (decrease) in cash (526,875) (158,419)
Cash and cash equivalents
beginning of period 3,769,280 1,762,976
--------------------------------------------------------------
Cash and cash equivalents
end of period $ 3,242,405 $ 1,604,557
--------------------------------------------------------------
--------------------------------------------------------------
Unaudited For six For six
(Expressed in United States months ended months ended
Dollars under United States GAAP) June 30, 2000 June 30, 1999
--------------------------------------------------------------
Cash provided by (used in)
Operations
Income (loss) for the period $(1,618,274) $ (298,252)
Items not requiring
(providing) cash:
Depreciation and amortization 671,540 133,441
Gain on sale of capital assets (120) (20,500)
Write-off of acquired in-process
research and development 446,639
Investment write-down 250,000
Options granted for services - 64,000
Changes in working capital balances 1,236,564 (72,637)
--------------------------------------------------------------
986,349 (193,948)
--------------------------------------------------------------
Financing
Issuance of shares, net 2,740,411 498,654
Increase in long-term liability 1,500,000
--------------------------------------------------------------
4,240,411 498,654
--------------------------------------------------------------
Investments
Purchase of capital assets (450,871) (102,574)
Purchase of intangible assets (3,057,967) -
Purchase of other assets - (743,688)
Proceeds from sale of capital assets 120 20,500
--------------------------------------------------------------
(3,508,718) (825,762)
--------------------------------------------------------------
Increase (decrease) in cash 1,718,042 (521,056)
Cash and cash equivalents
beginning of period 1,524,363 2,125,613
--------------------------------------------------------------
Cash and cash equivalents
end of period $ 3,242,405 $ 1,604,557
--------------------------------------------------------------
--------------------------------------------------------------
QSOUND LABS INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND DEFICIT
For the Six Month Periods Ended June 30, 2000 and 1999
Unaudited For three For three
(Expressed in United States months ended months ended
Dollars under United States GAAP) June 30, 2000 June 30, 1999
--------------------------------------------------------------
REVENUE
Royalties, license fees and
product sales $ 1,198,920 $ 783,589
Cost of product sales 24,787 65,857
--------------------------------------------------------------
1,174,133 717,732
--------------------------------------------------------------
EXPENSES:
Marketing 415,595 383,252
Product engineering 451,767 431,726
Administration 204,515 149,876
--------------------------------------------------------------
1,071,877 964,854
--------------------------------------------------------------
OPERATING PROFIT (LOSS) 102,256 (247,122)
OTHER ITEMS
Depreciation and amortization (403,097) (74,240)
Write-off of acquired in-process
research and development (446,639) -
Investment write-down (250,000) -
Other (101,208) 19,301
--------------------------------------------------------------
NET INCOME (LOSS) FOR PERIOD (1,098,688) (302,061)
DEFICIT BEGINNING OF PERIOD (31,380,645) (28,352,378)
--------------------------------------------------------------
DEFICIT END OF PERIOD $(32,479,333) $(28,654,439)
--------------------------------------------------------------
--------------------------------------------------------------
INCOME (LOSS) PER COMMON SHARE
UNDER UNITED STATES GAAP (0.04) (0.01)
--------------------------------------------------------------
--------------------------------------------------------------
NET INCOME (LOSS) UNDER
CANADIAN GAAP (730,038) (302,061)
--------------------------------------------------------------
--------------------------------------------------------------
INCOME (LOSS) PER COMMON SHARE
UNDER CANADIAN GAAP (0.03) (0.01)
--------------------------------------------------------------
--------------------------------------------------------------
Unaudited For six For six
(Expressed in United States months ended months ended
Dollars under United States GAAP) June 30, 2000 June 30, 1999
--------------------------------------------------------------
REVENUE:
Royalties, license fees and
product sales $ 2,034,271 $ 1,586,328
Cost of product sales 77,535 213,450
--------------------------------------------------------------
1,956,736 1,372,878
--------------------------------------------------------------
EXPENSES:
Marketing 758,386 642,954
Product engineering 956,795 736,003
Administration 410,090 214,396
--------------------------------------------------------------
2,125,271 1,593,353
--------------------------------------------------------------
OPERATING PROFIT (LOSS) (168,535) (220,475)
OTHER ITEMS
Depreciation and amortization (671,540) (133,442)
Write-off of acquired in-process
research and development (446,639) -
Investment write-down (250,000) -
Other (81,560) 55,665
--------------------------------------------------------------
NET INCOME (LOSS) FOR PERIOD (1,618,274) (298,252)
DEFICIT BEGINNING OF PERIOD (30,861,059) (28,356,187)
--------------------------------------------------------------
DEFICIT END OF PERIOD $(32,479,333) $(28,654,439)
--------------------------------------------------------------
--------------------------------------------------------------
INCOME (LOSS) PER COMMON SHARE
UNDER UNITED STATES GAAP (0.06) $ (0.01)
--------------------------------------------------------------
--------------------------------------------------------------
NET INCOME (LOSS) UNDER
CANADIAN GAAP (1,284,413) $ (298,252)
--------------------------------------------------------------
--------------------------------------------------------------
INCOME (LOSS) PER COMMON SHARE
UNDER CANADIAN GAAP (0.05) $ (0.01)
--------------------------------------------------------------
--------------------------------------------------------------
Contact: QSound Labs, Inc.
Paula Murray, 954/796-8798
E-mail: paula.murray@qsound.com
Website: www.qsound.com
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