QSound Labs, Inc.
NASDAQ : QSND

QSound Labs, Inc.

May 13, 2008 16:02 ET

QSound Labs Reports First Quarter Results for 2008

CALGARY, ALBERTA--(Marketwire - May 13, 2008) - QSound Labs, Inc. (NASDAQ:QSND), a leading developer of audio and voice software products, today reported its first quarter financial results for 2008. Revenues for the three months ended March 31, 2008 were $423,000 as compared to $606,000 for the same period in FY2007. The net loss for the quarter, computed in accordance with US generally accepted accounting principles, was $(572,000) or $(0.06) per share as compared to a net loss of $(381,000) or $(0.04) per share for the same period in FY2007.

Recurring revenues for the quarter increased 7% to $346,000 from $325,000 in 2007. As expected, licensing and non- recurring engineering fee revenues continue to be a less significant contributor to total revenues and this was reflected in the 88% decrease between the first quarters for 2008 and 2007. The Company reported a working capital surplus of $1,167,000 as at March 31, 2008 of which cash comprised $949,000.

In April, the Company submitted a plan to The Nasdaq Stock Market outlining how it intends to specifically achieve and sustain compliance with the Nasdaq Capital Market listing requirements following receipt of a Nasdaq Staff deficiency letter, as previously reported. The Company has subsequently provided progress updates to the Nasdaq Stock Market. The Company expects to resolve this matter by early June.

"The foundation for success is to establish the microQ product suite as the solution of choice on as many major mobile device platforms as possible," stated David Gallagher, President of QSound Labs. "We are therefore very pleased with the two recent announcements made with CSR and Symbian that provide such opportunities for our technology."

"CSR and Symbian are leaders in their respective markets and therefore provide access for the Company to new mobile device designs wins that should expand upon and complement our existing wins at LG, Panasonic and Pantech."

About QSound Labs, Inc.

Since its inception in 1988, QSound Labs, Inc. has established itself as one of the world's leading audio technology companies. The Company has developed numerous innovative, proprietary audio solutions based on extensive research into human auditory perception. These technologies include virtual surround sound, 3D positional audio, stereo enhancement and MIDI Synthesis for the mobile devices, consumer electronics, PC/multimedia, and Internet markets. QSound Labs' cutting-edge audio technologies create rich, immersive 3D audio environments allowing consumers to enjoy stereo surround sound from headphones or from two, four and up to 7.1 speaker systems. The Company's customer and partner roster includes ARM, LG, Samsung, Pantech, STMicroelectronics, Telechips, CSR, Aricent, Broadcom, MITAC, Panasonic, Qualcomm, Sony Vaio and Toshiba amongst others. QSound Labs supports its semiconductor, software and OEM partners globally with offices in Canada, Europe, China and Japan. To hear 3D audio demos and learn more about QSound, 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, opportunities for new microQ design wins through CSR and Symbian, and expected achievement of compliance with Nasdaq listing requirements. 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 acceptance of microQ by major mobile device platform manufacturers, ability to achieve and sustain Nasdaq listing requirements, successful distribution of QSound-enabled products by licensees, loss of relationships with companies that do business with QSound, 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
As at March 31, 2008 and December 31, 2007
(unaudited)
(Expressed in United States dollars under United States GAAP)
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March 31, December 31,
2008 2007
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ASSETS
Current assets
Cash and cash equivalents $ 948,739 $ 1,232,255
Accounts receivable (net) 474,279 506,648
Note receivable 24,747 27,400
Inventory 8,924 12,217
Deposits and prepaid expenses 202,005 188,568
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1,658,694 1,967,088

Property and equipment 248,156 258,414
Deferred development costs 180,358 194,915
Intangible assets 66,249 70,260
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$ 2,153,457 $ 2,490,677
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable and accrued liabilities $ 285,196 $ 262,718
Deferred revenue 206,673 22,820
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491,869 285,538

Liability for pension benefit 10,078 5,079
Convertible notes 137,289 118,220

Shareholders' equity
Share capital 47,688,219 47,675,739
Warrants 1,027,114 1,027,114
Contributed surplus 2,973,871 2,959,339
Deficit (50,051,826) (49,479,722)
Accumulated Other Comprehensive Loss (123,157) (100,630)
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1,514,221 2,081,840

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$ 2,153,457 $ 2,490,677
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Consolidated
Statements of Operations and Deficit
For the periods ended March 31, 2008 and 2007
(unaudited)
(Expressed in United States dollars under United States GAAP)
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2008 2007
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REVENUE
Royalties, licenses and engineering fees $ 371,078 $ 536,209
Product sales 52,330 70,151
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423,408 606,360
Cost of product sales 17,025 26,715
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406,383 579,645

EXPENSES:
Marketing 288,036 398,757
Operations 65,108 33,226
Product engineering 237,258 180,588
Administration 308,403 280,705
Foreign exchange loss 1,946 821
Amortization 41,559 49,757
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942,310 943,854

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Loss before other items (535,927) (364,209)

OTHER ITEMS
Interest income 6,956 23,088
Interest on convertible notes (18,075) (20,342)
Accretion expense (19,069) (8,215)
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(30,188) (5,469)
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Loss before taxes (566,115) (369,678)
Foreign withholding tax (5,989) (11,267)
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Net loss for the period (572,104) (380,945)

Deficit, beginning of period (49,479,722) (48,216,880)
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Deficit, end of period $ (50,051,826) $ (48,597,825)
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Loss per common share (basic and diluted) $ (0.06) $ (0.04)
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Consolidated
Statements of Cash Flows
For the periods ended March 31, 2008 and 2007
(unaudited)
(Expressed in United States dollars under United States GAAP)
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2008 2007
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Cash provided by (used in)

OPERATIONS
Loss for the period $ (572,104) $ (380,945)
Items not requiring (providing) cash:
Amortization 41,559 49,757
Stock based compensation 27,012 101,209
Employee future benefits (17,528) -
Accretion expense 19,069 8,215
Other (347) (1,018)
Changes in working capital balances 228,556 (371,426)
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(273,783) (594,208)
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FINANCING
Issuance of common shares, net - 72,300
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INVESTMENTS
Note receivable 3,000 36,000
Purchase of property and equipment (8,785) (6,530)
Purchase of intangible assets (3,948) -
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(9,733) 29,470
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(Decrease) increase in cash (283,516) (492,438)
Cash and cash equivalents beginning of period 1,232,255 2,316,476
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Cash and cash equivalents end of period $ 948,739 $ 1,824,038
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