SRS Labs (NASDAQ: SRSL), a leading supplier of surround sound,
audio, and voice technologies, announced today that licensing
revenue from continuing operations for the fiscal first quarter
ending March 31, 2006, increased by 32.8 percent to $4.3 million
from $3.3 million for the same period in fiscal 2005. The company
reported net income from continuing operations for the fiscal first
quarter 2006 of $151 thousand, or $.01 per diluted share, compared
to net income of $206 thousand, or $ 0.01 per diluted share, for
the same period in the prior year. Total operating expenses during
the first quarter from continuing operations increased from $3.0
million in 2005 to $4.2 million in 2006. Included in this increase
is $343 thousand related to stock based compensation expense
recorded under FAS 123R and $150 thousand related to the company's
separation from its former chief financial officer. Additional
increases in expenses were noted in sales and marketing due to
increased headcount, commissions on higher sales and expanded
marketing activities. General and Administrative expenses increased
due to higher professional fees expenses and consulting agreements
related to human resources management and investor relations
activities. In February 2006, SRS announced its intention to sell
its Hong Kong-based semiconductor business, Valence Technology
Limited, in order to focus increased management attention and
financial resources on what it believes to be a large and expanding
market opportunity for its licensing business. The company also
announced at that time that it expects to divest its entire equity
interest in a joint venture between the company and Coming Home
Studios LLC. As a result of these decisions, beginning with the
first quarter ended March 31, 2006, the company is accounting for
the semiconductor business segment as well as the Coming Home
Studio joint venture as discontinued operations. The company
reported net income from discontinued operations of $11 thousand
for the quarter ended March 31, 2006, compared to net income from
discontinued operations of $15 thousand for the same period in the
prior year. "We are pleased that our results in the first quarter
of 2006 are consistent with the past five quarters of continuing
growth in our licensing operations. While growth in all five market
segments contributed to our success this quarter, the home
entertainment market segment continues to be the major contributor
to our licensing revenue, fueled in particular by our success in
flat panel televisions and monitors," said Thomas C.K. Yuen,
Chairman and CEO of SRS Labs, Inc. "In the first quarter, we
introduced a version of SRS WOW HD optimized specifically for
televisions. This new technology expands our already broad reach in
televisions with SRS TruSurround XT and leverages the global
strength of the SRS WOW brand, providing a good foundation for us
to build upon." The company also noted a significant increase in
net revenue during the first quarter of 2006 from the portable
media devices and automotive segments as compared to the first
quarter of 2005. To position the company to participate more
broadly in what it believes are expanding opportunities in Asia as
well as Europe, the company recently announced that it has added
new sales personnel in Taiwan and Europe. Yuen said, "We believe
that adding to our sales force in Asia will allow us to maximize
our revenue opportunities with new and existing customers.
Additionally, we believe that the European region represents a
growing opportunity for us and the relationships we have with both
customers and chip partners can now be better leveraged. Expanding
local support will further enhance our ability to quickly meet our
customer's needs, thereby building our business." Conference Call
SRS will host a conference call and webcast at 2 p.m. Pacific time
today (5 p.m. Eastern Time) to review its fiscal 2006 first quarter
results. The dial-in number for the call in North America is
866-802-4305 and 703-639-1317 for international callers. The call
will also be webcast live over the Internet. Simply log-on to
www.srslabs.com. The webcast will be archived on the company's
website for 60 days following the call. An audio replay of the
conference call will be available for seven days beginning at 5
p.m. Pacific Time on May 11. The audio replay dial-in number for
North American is 866-837-8032. The replay pass code is 902570.
About SRS Labs, Inc. SRS Labs is a recognized leader in the
advancement of audio and voice technology. The company works with
the world's top manufacturers to provide a richer entertainment
experience through patented sound techniques. SRS Labs'
technologies can be heard through products ranging from
televisions, LCD and plasma monitors, cell phones, MP3 players, car
audio systems, and notebook and desktop computers. The company also
offers hardware and software tools to professionals and consumers
for the creation, production and broadcast of content featuring SRS
Labs' technologies. Based in Santa Ana, Calif., the company also
has licensing representation in Hong Kong, Japan, China, Europe,
and Korea. For more information about SRS Labs, Inc. please visit
www.srslabs.com. The information on the aforementioned website is
not incorporated by reference into this press release. Except for
historical information contained in this release, statements in
this release, including those of Mr. Yuen are forward-looking
statements and projections (which include statements concerning
plans and objectives of management for future operations) that are
based on management's belief, as well as assumptions made by, and
information currently available to, management. While the company
believes that its expectations are based upon reasonable
assumptions, there can be no assurances that the company's goals
and strategy will be realized. Numerous factors, including risks
and uncertainties, may affect the company's actual results and may
cause results to differ materially from those expressed in
forward-looking statements made by or on behalf of the company.
Some of these factors include uncertainties related to the sale of
Valence Technology Limited and the divestiture of the company's
equity investment in the joint venture, the general market
conditions concerning the semiconductor business, the acceptance of
new SRS Labs' products and technologies, the impact of competitive
products and pricing, the timely development and release of
technologies by the company, general business and economic
conditions, especially in Asia, and other factors detailed in the
company's Form 10-K and other periodic reports filed with the SEC.
SRS Labs specifically disclaims any obligation to update or revise
any forward-looking statement whether as a result of new
information, future developments or otherwise. -0- *T SRS LABS,
INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
Three Months Ended March 31, ----------------------- 2006 2005
----------- ----------- Revenues $4,335,668 $3,264,095 Cost of
sales 47,812 56,345 ----------- ----------- Gross margin 4,287,856
3,207,750 Operating expenses: Sales and marketing 1,865,369
1,182,447 Research and development 654,289 576,205 General and
administrative 1,637,208 1,272,851 ----------- ----------- Total
operating expenses 4,156,866 3,031,503 ----------- -----------
Income from continuing operations 130,990 176,247 Other income, net
179,713 149,270 ----------- ----------- Income from continuing
operations before income tax expense 310,703 325,517 Income tax
expense 159,423 119,024 ----------- ----------- Income from
continuing operations 151,280 206,493 ----------- -----------
Discontinued operations: Income from discontinued operations before
income tax expense 42,376 20,145 Income tax expense 31,081 5,178
----------- ----------- Income from discontinued operations 11,295
14,967 ----------- ----------- Net income $162,575 $ 221,460
=========== =========== Income from continuing operations per
common share: Basic $ 0.01 $ 0.01 Diluted $ 0.01 $ 0.01 Income from
discontinued operations per common share: Basic $ 0.00 $ 0.00
Diluted $ 0.00 $ 0.00 Net income per common share: Basic $ 0.01 $
0.02 Diluted $ 0.01 $ 0.01 Weighted average shares used in the per
share calculation: Basic 14,423,611 14,241,522 Diluted 15,843,052
15,255,107 SRS LABS, INC. CONDENSED CONSOLIDATED BALANCE SHEETS
March 31, December 31, 2006 2005 ------------ ------------
(unaudited) ASSETS Current Assets Cash and cash equivalents
$10,627,409 $ 8,752,339 Accounts receivable, net 1,150,103
1,886,780 Inventories, net 74,318 80,421 Prepaid expenses and other
current assets 504,421 522,426 Assets held for sale 2,216,084
1,859,127 ------------ ------------ Total Current Assets 14,572,335
13,101,093 Investments available for sale 17,019,395 17,077,170
Furniture, fixtures and equipment, net 485,686 425,288 Intangible
assets, net 2,098,295 2,015,605 Deferred income taxes 386,412
380,386 Long term assets held for sale 1,997,510 2,065,123
------------ ------------ Total Assets $36,559,633 $35,064,665
============ ============ LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities Accounts payable $ 856,042 $ 741,811 Accrued
liabilities 860,816 801,898 Deferred revenue 408,654 537,636
Liabilities related to assets held for sale 2,102,253 2,170,701
------------ ------------ Total Current Liabilities 4,227,765
4,252,046 Commitments and contingencies Stockholders' Equity
Preferred stock--$.001 par value; 2,000,000 shares authorized; no
shares issued or outstanding -- -- Common stock--$.001 par value;
56,000,000 shares authorized; 15,184,060 and 14,953,690 shares
issued; and 14,509,962 and 14,279,592 shares outstanding at March
31, 2006 and December 31, 2005, respectively 15,185 14,955
Additional paid-in capital 64,989,244 63,574,518 Accumulated other
comprehensive loss (554,303) (496,021) Accumulated deficit
(29,114,813) (29,277,388) Treasury stock at cost, 674,098 shares at
March 31, 2006 and December 31, 2005 (3,003,445) (3,003,445)
------------ ------------ Total Stockholders' Equity 32,331,868
30,812,619 ------------ ------------ Total Liabilities and
Stockholders' Equity $36,559,633 $35,064,665 ============
============ *T
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