3DsoundSurge Press Release: QSound Labs Reports 1999 First Quarter Results


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QSound Labs Reports 1999 First Quarter Results

CALGARY, Alberta--(BUSINESS WIRE)--May 4, 1999--QSound Labs, Inc. reported increased revenues for the three months ended March 31, 1999 of $802,739 as compared to $551,528 for the same period in 1998. Net income for the period was $3,809 or $0.00 per share as compared to a net loss of $314,186 or $0.01 for the same period in 1998.

Increased revenues were derived primarily from software download sales over the Internet. The Company has no debt and working capital totaled approximately $3.5 million.

Highlights from the first quarter include:

Internet - Media

The QSound Affiliate Program (QAP) continued to gain momentum during the first quarter of 1999. There are now over 500 affiliates that offer one or more QSound products from their web sites. RealNetworks continues to be the most active web site for downloading QSound software. New relationships were established with GeoCities and subsequent to the quarter ending broadcast.com, as the Company continues to broaden its distribution base on the Internet. New products are in development for this sales channel.

Internet - e-commerce

During the first quarter, QSound commenced the development of a new software program, affiliateDirect. This marked the beginning of a new strategic initiative for QSound, based on the Company's core competencies of software development and our nine month old QAP experience. affiliateDirect is a stand alone solution that tracks and serves banners on affiliate web sites, monitors banner traffic, offers product for sale and completes credit card transactions. Originally developed as a solution for the QSound Affiliate Program, affiliateDirect is now targeted to be a general e-commerce solution for all web merchants. The product is expected to be ready for sale by the end of the second quarter.

PC/Multimedia

License revenues from PCI audio semiconductor companies continued to be below forecast. All of our licensees expect revenues to increase as 1999 progresses and PCI audio solutions gain momentum. The Company has allocated engineering resources to the development of ``softaudio'' solutions to be well positioned for all market developments in 1999.

Hearing Aids

In February, Starkey, one of the world's largest custom hearing aid manufacturers, confirmed that it had completed final testing of the Cetera(TM) digital hearing aid and has since presented and demonstrated the product at the American Academy of Audiology's annual convention. First revenues from this license are expected in the second quarter of 1999.

Consumer Electronics

In the first quarter, QSound added to its growing world-wide presence by entering the China market with the signing of a license agreement with Xiamen Xiaxim Electronics Co., Ltd., one of China's largest consumer audio and video OEMs. The Company expects to sign several more major licenses in China in the coming months. Revenues from Japan and Korean OEMs were consistent with previous quarters.

About QSound Labs, Inc.

Founded in 1988, Calgary-based QSound Labs, Inc. (Nasdaq:QSND - news), is a technology company specializing in software audio applications for the Internet, PC/multimedia, Consumer Electronics and Healthcare industries. Its patented technologies provide these industries with immersive, realistic sound environments that include positional audio, stereo enhancement and virtual surround sound solutions. A key contributing factor to the success of QSound's Internet software audio products has been the development of an e-commerce solution, the QSound Affiliate Program, an enabling technology for the marketing and sales of QSound products via the Internet. For more information, visit our Web site at www.qsound.com.

This release contains forward-looking statements within the meaning of the Private Securities Litigation Act of 1995 concerning, among other things, the anticipated signing of new license agreements, the anticipated introduction of new products, projected shipment dates of products and 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 development and commercialization of the Company's technologies, 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
(Unaudited) (Expressed in United States Dollars)
As at March 31, 1999

                                        March 31     March 31
--------------------------------------------------------------
                                          1999         1998
--------------------------------------------------------------
ASSETS

Current assets:
  Cash and short term deposits      $ 1,762,976  $  2,687,981
  Accounts receivable                   528,432       492,125
  Accrued revenue                       656,244       779,874
  Royalties receivable                  430,924       167,507
  Prepaid expenses                      245,474        70,491
  Inventory                             140,253       373,233
  ------------------------------------------------------------
                                      3,764,303     4,571,211

Capital Assets                        1,173,148     1,514,963

--------------------------------------------------------------
                                    $ 4,937,451  $  6,086,174
--------------------------------------------------------------
--------------------------------------------------------------

LIABILITIES, SHARE CAPITAL AND DEFICIT


Current liabilities:
  Accounts payable                  $   122,322  $    258,334
  Accrued liabilities                    23,989        19,360
  Interest payable on long term debt          -         1,394
  Current maturity of long-term debt          -        13,084
  ------------------------------------------------------------
                                        146,311       292,172

Long term debt                                -       204,199

Share capital and deficit:
  Common shares (24,133,686 shares)  33,143,518    32,739,507
  Preferred shares                            -       188,015
  Deficit                           (28,352,378)  (27,337,719)
                                    --------------------------
                                      4,791,141     5,589,803
--------------------------------------------------------------
                                    $ 4,937,451  $  6,086,174
--------------------------------------------------------------
--------------------------------------------------------------

QSOUND LABS, INC.
Consolidated Statements of Operations and Deficit

For the three months ended March 31, 1999
(Unaudited)
(Expressed in US Dollars)                March 31    March 31
--------------------------------------------------------------
                                          1999         1998
--------------------------------------------------------------

Revenue:
  Royalties                         $   192,229  $     96,885
  Development & license fees            106,429       128,455
  Rentals and other                       3,333         3,328
  Product sales                         500,748       322,590
  ------------------------------------------------------------
                                        802,739       551,258
Cost of products sold                  (147,593)      (21,499)
--------------------------------------------------------------
                                        655,146       529,759
Expenses:
  Marketing                             259,702       379,918
  Product Engineering                   304,277       289,259
  Administration                         69,904       134,648
  Interest on long-term debt                  -         4,178
  Amortization                           59,201        66,048
  Foreign exchange loss                  (5,383)      (10,069)
  Gain on sale of assets                (15,000)            -
  Interest income                       (21,364)      (20,037)
  ------------------------------------------------------------
                                        651,337       843,945
--------------------------------------------------------------
Income (Loss) for the period              3,809      (314,186)

Deficit, beginning of period        (28,356,187)  (27,023,533)

--------------------------------------------------------------
Deficit, end of period             $(28,352,378) $(27,337,719)
--------------------------------------------------------------
--------------------------------------------------------------
Income (Loss) per common share under
 Canadian GAAP                     $       0.00  $      (0.01)
--------------------------------------------------------------
--------------------------------------------------------------
Income (Loss) for the period under
 United States GAAP                $      3,809  $   (314,186)
--------------------------------------------------------------
--------------------------------------------------------------
Income (Loss) per common share under
 United States GAAP                $       0.00  $      (0.01)
--------------------------------------------------------------
--------------------------------------------------------------



QSOUND LABS, INC.
Consolidated Statements of Changes in Financial Position
As at March 31, 1999
(Unaudited)
(Expressed in US Dollars)               March 31     March 31
--------------------------------------------------------------
                                          1999         1998
--------------------------------------------------------------

Cash provided by (used in)
Operations
 Income (Loss) for the period      $      3,809  $   (314,186)
 Items not requiring (providing) cash
  Depreciation and amortization          59,201        66,048
  Gain on sale of capital assets        (15,000)            -
 Changes in working capital balances
  Accounts receivable                  (119,926)      189,823
  Accrued revenue                        (1,001)      (91,486)
  Royalties receivable                  (55,789)      (38,945)
  Prepaid expenses                     (170,194)        9,434
  Inventory                              85,453        30,056
  Accounts payable                      (14,899)     (101,862)
  Accrued liabilities                   (10,660)      (28,679)
  Interest payable on long term debt          -            (8)
  Deferred revenue                      (44,620)            -
--------------------------------------------------------------
                                       (283,626)     (279,805)
Financing
  Issuance of shares, net               203,886       984,384
  Repayments of long-term debt                -        (1,250)
  ------------------------------------------------------------
                                        203,886       983,134
Investments
  Purchase of capital assets            (32,897)     (105,675)
  Purchase of other assets             (265,000)
  Proceeds from sale of capital assets   15,000             -
--------------------------------------------------------------
                                       (282,897)     (105,675)
--------------------------------------------------------------
Increase (decrease) in cash            (362,637)      597,654

Cash, beginning of period             2,125,613     2,090,327
--------------------------------------------------------------
Cash, end of period                $  1,762,976  $  2,687,981
--------------------------------------------------------------
--------------------------------------------------------------

Contact:

     QSound Labs, Inc.
     Paula Murray, 954/796-8798
     954/796-9312  (FAX)
     paula.murray@qsound.com
     http://www.qsound.com

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