Published: April 28, 2006
QSound Labs Reports First Quarter Results for 2006 at Annual Shareholders' Meeting
QSound Labs, Inc. (NASDAQ: QSND), a leading developer of audio and voice software products, today reported its first quarter financial results at its 2006 Annual Meeting of Shareholders. Revenues for the three months ended March 31, 2006 were $673,000 as compared to $477,000 for the same period in FY2005. The net loss for the period was $(180,000) or $(0.02) per share as compared to a net loss of $(375,000) or $(0.04) per share for the same period in FY2005.
The Company reported a working capital surplus of $3,088,000 as at March 31, 2006 of which cash comprised $2,224,000. During the quarter, the Company concluded a convertible note financing for $1,000,000. As at the quarter end, the balance sheet reflects a net balance of $504,000 since $496,000 has been allocated to the calculated fair value of issuing 400,000 warrants as part of the transaction.
All proposed motions were carried at the Shareholders' Meeting, including the election of directors.
In reviewing the current status of the Company, David Gallagher, President of QSound Labs, noted the following:
"The Company continues to strategically focus on marketing its audio technology solutions to the mobile device market. The initial design wins in the smartphone segment and perhaps, more significantly, the decisions to continue using microQ in future phone models by MITAC and BenQ, have validated the Company's technology for this market."
"The second phase of the strategy, which was to align the Company with the major mobile device platform providers and semiconductor companies, is still a work-in-progress but is poised for success in 2006. Of our existing platform licensees, only UTStarcom is shipping microQ-enabled product at this time. Our other major licensees have had product samples of their microQ-enabled platforms available since last year and are now well positioned for customer orders. Specifically, Broadcom's recent announcements regarding the microQ enabled BCM2133 Edge/GPRS based platform and their next generation BCM2152 HSDPA/WCDMA based platform are very encouraging. Additionally, management expects that the first microQ enabled phones powered by Qualcomm's chipsets, which offer microQ technology branded as QConcert & QAudioFX, will be available in the second half of 2006."
"During the first quarter, the Company completed its first license for its new IP voice chat/conferencing software solution, for which the Company received a lump sum payment from a major video game manufacturer."
In conclusion, Mr. Gallagher stated: "As reported previously, gaining traction in the mobile marketplace is more of a marathon than a sprint, however the efforts of the past few years are beginning to show results and we thank our shareholders for their patience and understanding."
This release contains forward-looking statements within the meaning of the Private Securities Litigation Act of 1995 concerning, among other things, expectation in 2006 of revenues from microQ shipments, including Broadcom and Qualcomm microQ-enabled chipsets. 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 successful distribution of QSound-enabled products by licensees, loss of relationships with companies that do business with QSound, 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.
Consolidated
Balance sheets
March 31, 2006 and December 31, 2005
(Expressed in United States dollars under US GAAP)
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March 31, 2006 December 31, 2005
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(unaudited)
ASSETS
Current assets
Cash and cash equivalents $ 2,223,655 $ 1,222,729
Accounts receivable (net) and
accrued revenue 912,933 401,524
Note receivable 26,442 82,648
Inventory 37,252 40,438
Deposits and prepaid expenses 112,404 76,146
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3,312,686 1,823,485
Note receivable 57,784 -
Property and equipment 588,860 670,635
Deferred development costs 236,865 271,879
Intangible assets 155,073 155,445
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$ 4,351,268 $ 2,921,444
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable and accrued
liabilities $ 181,163 $ 285,786
Deferred revenue 40,483 45,011
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221,646 330,797
Convertible loan (net) 504,088 -
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725,734 330,797
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Shareholders' equity
Share capital 47,106,809 46,181,113
Warrants 1,781,336 1,502,331
Contributed surplus 1,452,558 1,442,408
Deficit (46,715,169) (46,535,205)
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3,625,534 2,590,647
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$ 4,351,268 $ 2,921,444
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Consolidated
Statements of Operations and Deficit
For the three month periods ended March 31, 2006 and 2005
(Expressed in United States dollars under US GAAP)
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2006 2005
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(unaudited) (unaudited)
REVENUE
Royalties, licenses and engineering
fees $ 592,717 $ 337,648
Product sales 81,053 139,096
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673,770 476,744
Cost of product sales 8,074 46,806
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665,696 429,938
EXPENSES
Marketing 201,565 230,974
Operations 35,877 43,230
Product engineering 215,632 227,025
Administration 222,970 192,601
Foreign exchange loss 8,687 1,971
Amortization 163,288 101,684
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848,019 797,485
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Loss before other items (182,323) (367,547)
OTHER ITEMS
Interest income 7,662 11,453
Interest on convertible loan (425) -
Convertible loan amortization (543) -
Other - (3,168)
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6,694 8,285
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Loss before taxes (175,629) (359,262)
Foreign withholding tax (4,335) (15,885)
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Net loss for the period (179,964) (375,147)
Deficit, beginning of period (46,535,205) (43,903,626)
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Deficit, end of period $(46,715,169) $(44,278,773)
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Loss per common share
(basic and diluted) $ (0.02) $ (0.04)
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Consolidated
Statements of Cash Flows
For the three month periods ended March 31, 2006 and 2005
(Expressed in United States dollars under US GAAP)
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2006 2005
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(unaudited) (unaudited)
Cash provided by (used in)
OPERATIONS
Loss for the period $ (179,964) $ (375,147)
Items not requiring (providing) cash:
Amortization 163,288 101,684
Stock based compensation 71,981 22,037
Convertible loan amortization 543 -
Changes in non-cash working capital
balances (653,632) (249,903)
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(597,784) (501,329)
FINANCING
Issuance of common shares, net 646,415 17,859
Issuance of warrants 496,455 -
Convertible loan (net) 503,545 -
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1,646,415 17,859
INVESTMENTS
Note receivable (1,578) -
Purchase of property and equipment (9,422) (82,654)
Purchase of deferred development costs (23,080) -
Purchase of intangible assets (13,625) (14,890)
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(47,705) (97,544)
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(Decrease) increase in cash and cash
equivalents 1,000,926 (581,014)
Cash and cash equivalents,
beginning of period 1,222,729 3,327,543
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Cash and cash equivalents,
end of period $ 2,223,655 $ 2,746,529
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