SRS Labs, Inc. (NASDAQ:SRSL), a leading supplier of surround sound,
audio, and voice technologies, announced today that for the third
quarter ended September 30, 2006, licensing revenue from continuing
operations, increased by 34.9 percent to $4.9 million from $3.6
million for the same period in fiscal 2005, and net income from
continuing operations increased to $1.3 million, or $.08 per
diluted share, compared to $707 thousand, or $.05 per diluted
share, for the same period in the prior year.�Included in operating
expenses from continuing operations for the three month period
ended September 30, 2006 is $383 thousand related to stock based
compensation expensing. The Company also reported consolidated net
income for the third quarter ended September 30, 2006 of $2.4
million or $.15 per diluted share, compared to $704 thousand or
$.05 per diluted share for the same period in the prior year. For
the nine months ended September 30, 2006, licensing revenue from
continuing operations increased by 29.3 percent to $13.5 million
from $10.4 million for the same period in fiscal 2005 and net
income from continuing operations increased to $1.8 million, or
$.11 per diluted share from $1.3 million, or $.09 per diluted share
for the same period in fiscal 2005. Consolidated net income for the
nine months ended September 30, 2006 increased to $3.5 million or
$.21 per diluted share compared to $1.4 million or $.10 per diluted
share for the same period in the prior year. Included in operating
expenses from continuing operations for the nine month period ended
September 30, 2006 is $1.2 million related to stock based
compensation expensing. Thomas C.K. Yuen, Chairman and CEO of SRS
Labs, Inc., commenting on the quarter, �We are very pleased with
the results of this current quarter in many different ways. From a
revenue perspective, we made strong gains with unit volumes in flat
panel TVs, car audio, and in the digital audio accessory market.
From a net income perspective, due to our highly 'leverage-able'
business model, one in which increases in top line production,
generally, does not require proportionate increases in costs nor
operating expenses, we were able to realize greater improvement in
net income. We believe that we are positioned to continue to drive
revenue growth while keeping increases in operating expenses low.
From a marketing and branding perspective, we are seeing more
products appearing on retail shelves and in advertisements by major
consumer brands featuring our logo world wide, especially in the
highly visible large flat panel TV market. This quarter, we were
very pleased to announce our new relationship with Sharper Image.
Beginning this holiday season, a variety of consumer products
prominently featuring our technologies and logo will appear in
Sharper Image stores nationwide, as well as in their widely
distributed catalogs. We appreciate this unique opportunity to
enhance our visibility and collaborating with a highly regarded
partner. Additionally, we launched two online downloadable audio
enhancement software products, the iWOW for Apple based products
and the SRS Audio Sandbox 'SAS' for Microsoft Windows based
products. Through these offerings, which are available at
http://www.srs-store.com/store-plugins/mall/sas-plugin.aspt, we
hope to build more direct consumer awareness as well as exploring
other revenue opportunities based on our technology and similar
business models. Lastly, we are also pleased to have completed the
sale of Valence Technology Limited to allow us to focus all of our
attention on the audio technology licensing portion of our
business.� In February 2006, SRS announced its intention to sell
its Hong Kong-based semiconductor business, Valence Technology
Limited. On July�14, 2006, the Company entered into a definitive
Sale and Purchase Agreement (�Purchase Agreement�) and on September
29, 2006, the Company completed the transaction, which resulted in
a gain on sale of $261 thousand. For the period July 1, 2006
through the date of sale, Valence Technology Limited reported net
income from operations of $857 thousand. Both the gain on sale and
the results from operations are included in discontinued
operations. 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 third quarter results. The dial-in number
for the call is (866) 814-8483, ask for �SRS Labs Q3 Results
Conference Call� or provide conference call ID 982704. An audio
replay of the conference call will be available until November 14
at 6:00pm Pacific time via telephone. The audio replay dial-in
number is (866) 837-8032 and enter conference ID 982704. The call
will also be webcast live over the Internet. Simply log-on to
http://phx.corporate-ir.net/playerlink.zhtml?c=97327&s=wm&e=1401222.
The webcast will be archived on the company�s website for 60 days
following the call. 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, Taiwan, 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, 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. SRS LABS,�INC.
CONDENSED CONSOLIDATED BALANCE SHEETS � September 30,2006 December
31,2005 (unaudited) ASSETS Current Assets Cash and cash equivalents
$26,126,915� $8,752,339� Accounts receivable, net 2,289,830�
1,886,780� Inventories, net 158,253� 80,421� Prepaid expenses and
other current assets 910,902� 522,426� Investments available for
sale 1,993,279� �� Assets held for sale �� 1,859,127� � Total
Current Assets 31,479,179� 13,101,093� � Investments available for
sale 5,211,295� 17,077,170� Furniture, fixtures and equipment, net
441,453� 425,288� Intangible assets, net 2,096,507� 2,015,605�
Deferred income taxes 386,412� 380,386� Long term assets held for
sale �� 2,065,123� � Total Assets $39,614,846� $35,064,665� �
LIABILITIES AND STOCKHOLDERS� EQUITY Current Liabilities Accounts
payable $898,289� $741,811� Accrued liabilities 1,113,929� 801,898�
Deferred revenue 440,861� 537,636� Liabilities related to assets
held for sale �� 2,170,701� � Total Current Liabilities 2,453,079�
4,252,046� � Commitments and contingencies � Stockholders� Equity
Preferred stock�$.001 par value; 2,000,000 shares authorized; no
shares issued or outstanding �� �� Common stock�$.001 par value;
56,000,000 shares authorized; 15,657,751 and 14,953,690 shares
issued; and 14,983,653 and 14,279,592 shares outstanding at
September 30, 2006 and December 31, 2005, respectively 15,659�
14,955� Additional paid-in capital 66,239,460� 63,574,518�
Accumulated other comprehensive loss (295,131) (496,021)
Accumulated deficit (25,794,776) (29,277,388) Treasury stock at
cost, 674,098 shares at September 30, 2006 and December 31, 2005
(3,003,445) (3,003,445) � Total Stockholders� Equity 37,161,767�
30,812,619� � Total Liabilities and Stockholders� Equity
$39,614,846� $35,064,665� SRS LABS,�INC. CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS (Unaudited) � Three Months Ended Nine
Months Ended September 30, September 30, 2006� 2005� 2006� 2005� �
Revenues $4,910,203� $3,640,134� $13,505,710� $10,444,206� Cost of
sales 43,998� 39,804� 127,103� 190,987� � Gross margin 4,866,205�
3,600,330� 13,378,607� 10,253,219� � Operating expenses: Sales and
marketing 1,743,660� 1,087,025� 5,494,445� 3,295,949� Research and
development 628,227� 584,008� 1,914,255� 1,708,000� General and
administrative 1,277,601� 1,198,433� 4,272,598� 3,898,785� � Total
operating expenses 3,649,488� 2,869,466� 11,681,298� 8,902,734� �
Income from continuing operations 1,216,717� 730,864� 1,697,309�
1,350,485� Other income, net 291,236� 176,707� 694,954� 486,318�
Income from continuing operations before income tax expense
1,507,953� 907,571� 2,392,263� 1,836,803� Income tax expense
231,620� 200,420� 558,788� 487,950� Income from continuing
operations 1,276,333� 707,151� 1,833,475� 1,348,853� � Discontinued
operations: Income (loss) from discontinued operations before
income tax expense (benefit) 859,843� (123,490) 1,054,095� (24,257)
Gain on disposal 260,763� �� 632,058� �� Income tax expense
(benefit) 6,320� (120,533) 37,016� (114,792) Income (loss) from
discontinued operations 1,114,286� (2,957) 1,649,137� 90,535� � Net
income $2,390,619� $704,194� $3,482,612� $1,439,388� � Income from
continuing operations per common share: Basic $0.09� $0.05� $0.13�
$0.10� Diluted $0.08� $0.05� $0.11� $0.09� � Income from
discontinued operations per common share: Basic $0.07� $0.00�
$0.11� $0.01� Diluted $0.07� $0.00� $0.10� $0.01� � Net income per
common share: Basic $0.16� $0.05� $0.24� $0.10� Diluted $0.15�
$0.05� $0.21� $0.10� � Weighted average shares used in the
calculation of net income per common share: Basic 14,939,806�
14,094,690� 14,663,767� 14,076,833� Diluted 16,479,112� 15,300,803�
16,428,894� 15,070,362� SRS Labs, Inc. (NASDAQ:SRSL), a leading
supplier of surround sound, audio, and voice technologies,
announced today that for the third quarter ended September 30,
2006, licensing revenue from continuing operations, increased by
34.9 percent to $4.9 million from $3.6 million for the same period
in fiscal 2005, and net income from continuing operations increased
to $1.3 million, or $.08 per diluted share, compared to $707
thousand, or $.05 per diluted share, for the same period in the
prior year. Included in operating expenses from continuing
operations for the three month period ended September 30, 2006 is
$383 thousand related to stock based compensation expensing. The
Company also reported consolidated net income for the third quarter
ended September 30, 2006 of $2.4 million or $.15 per diluted share,
compared to $704 thousand or $.05 per diluted share for the same
period in the prior year. For the nine months ended September 30,
2006, licensing revenue from continuing operations increased by
29.3 percent to $13.5 million from $10.4 million for the same
period in fiscal 2005 and net income from continuing operations
increased to $1.8 million, or $.11 per diluted share from $1.3
million, or $.09 per diluted share for the same period in fiscal
2005. Consolidated net income for the nine months ended September
30, 2006 increased to $3.5 million or $.21 per diluted share
compared to $1.4 million or $.10 per diluted share for the same
period in the prior year. Included in operating expenses from
continuing operations for the nine month period ended September 30,
2006 is $1.2 million related to stock based compensation expensing.
Thomas C.K. Yuen, Chairman and CEO of SRS Labs, Inc., commenting on
the quarter, "We are very pleased with the results of this current
quarter in many different ways. -- From a revenue perspective, we
made strong gains with unit volumes in flat panel TVs, car audio,
and in the digital audio accessory market. -- From a net income
perspective, due to our highly 'leverage-able' business model, one
in which increases in top line production, generally, does not
require proportionate increases in costs nor operating expenses, we
were able to realize greater improvement in net income. We believe
that we are positioned to continue to drive revenue growth while
keeping increases in operating expenses low. -- From a marketing
and branding perspective, we are seeing more products appearing on
retail shelves and in advertisements by major consumer brands
featuring our logo world wide, especially in the highly visible
large flat panel TV market. This quarter, we were very pleased to
announce our new relationship with Sharper Image. Beginning this
holiday season, a variety of consumer products prominently
featuring our technologies and logo will appear in Sharper Image
stores nationwide, as well as in their widely distributed catalogs.
We appreciate this unique opportunity to enhance our visibility and
collaborating with a highly regarded partner. Additionally, we
launched two online downloadable audio enhancement software
products, the iWOW for Apple based products and the SRS Audio
Sandbox 'SAS' for Microsoft Windows based products. Through these
offerings, which are available at
http://www.srs-store.com/store-plugins/mall/sas-plugin.aspt, we
hope to build more direct consumer awareness as well as exploring
other revenue opportunities based on our technology and similar
business models. -- Lastly, we are also pleased to have completed
the sale of Valence Technology Limited to allow us to focus all of
our attention on the audio technology licensing portion of our
business." In February 2006, SRS announced its intention to sell
its Hong Kong-based semiconductor business, Valence Technology
Limited. On July 14, 2006, the Company entered into a definitive
Sale and Purchase Agreement ("Purchase Agreement") and on September
29, 2006, the Company completed the transaction, which resulted in
a gain on sale of $261 thousand. For the period July 1, 2006
through the date of sale, Valence Technology Limited reported net
income from operations of $857 thousand. Both the gain on sale and
the results from operations are included in discontinued
operations. 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 third quarter results. The dial-in number
for the call is (866) 814-8483, ask for "SRS Labs Q3 Results
Conference Call" or provide conference call ID 982704. An audio
replay of the conference call will be available until November 14
at 6:00pm Pacific time via telephone. The audio replay dial-in
number is (866) 837-8032 and enter conference ID 982704. The call
will also be webcast live over the Internet. Simply log-on to
http://phx.corporate-ir.net/playerlink.zhtml?c=97327&s=wm&e=1401222.
The webcast will be archived on the company's website for 60 days
following the call. 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, Taiwan, 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, 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 BALANCE SHEETS September 30, December
31, 2006 2005 ------------- ------------ (unaudited) ASSETS Current
Assets Cash and cash equivalents $26,126,915 $8,752,339 Accounts
receivable, net 2,289,830 1,886,780 Inventories, net 158,253 80,421
Prepaid expenses and other current assets 910,902 522,426
Investments available for sale 1,993,279 -- Assets held for sale --
1,859,127 ------------- ------------ Total Current Assets
31,479,179 13,101,093 Investments available for sale 5,211,295
17,077,170 Furniture, fixtures and equipment, net 441,453 425,288
Intangible assets, net 2,096,507 2,015,605 Deferred income taxes
386,412 380,386 Long term assets held for sale -- 2,065,123
------------- ------------ Total Assets $39,614,846 $35,064,665
============= ============ LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities Accounts payable $898,289 $741,811 Accrued
liabilities 1,113,929 801,898 Deferred revenue 440,861 537,636
Liabilities related to assets held for sale -- 2,170,701
------------- ------------ Total Current Liabilities 2,453,079
4,252,046 Commitments and contingencies Stockholders' Equity
Preferred stock--$.001 par value; 2,000,000 shares authorized; no
shares issued or outstanding -- -- Common stock--$.001 par value;
56,000,000 shares authorized; 15,657,751 and 14,953,690 shares
issued; and 14,983,653 and 14,279,592 shares outstanding at
September 30, 2006 and December 31, 2005, respectively 15,659
14,955 Additional paid-in capital 66,239,460 63,574,518 Accumulated
other comprehensive loss (295,131) (496,021) Accumulated deficit
(25,794,776) (29,277,388) Treasury stock at cost, 674,098 shares at
September 30, 2006 and December 31, 2005 (3,003,445) (3,003,445)
------------- ------------ Total Stockholders' Equity 37,161,767
30,812,619 ------------- ------------ Total Liabilities and
Stockholders' Equity $39,614,846 $35,064,665 =============
============ *T -0- *T SRS LABS, INC. CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS (Unaudited) Three Months Ended Nine Months
Ended September 30, September 30, -----------------------
------------------------- 2006 2005 2006 2005 -----------
----------- ------------ ------------ Revenues $4,910,203
$3,640,134 $13,505,710 $10,444,206 Cost of sales 43,998 39,804
127,103 190,987 ----------- ----------- ------------ ------------
Gross margin 4,866,205 3,600,330 13,378,607 10,253,219 Operating
expenses: Sales and marketing 1,743,660 1,087,025 5,494,445
3,295,949 Research and development 628,227 584,008 1,914,255
1,708,000 General and administrative 1,277,601 1,198,433 4,272,598
3,898,785 ----------- ----------- ------------ ------------ Total
operating expenses 3,649,488 2,869,466 11,681,298 8,902,734
----------- ----------- ------------ ------------ Income from
continuing operations 1,216,717 730,864 1,697,309 1,350,485 Other
income, net 291,236 176,707 694,954 486,318 ----------- -----------
------------ ------------ Income from continuing operations before
income tax expense 1,507,953 907,571 2,392,263 1,836,803 Income tax
expense 231,620 200,420 558,788 487,950 ----------- -----------
------------ ------------ Income from continuing operations
1,276,333 707,151 1,833,475 1,348,853 Discontinued operations:
Income (loss) from discontinued operations before income tax
expense (benefit) 859,843 (123,490) 1,054,095 (24,257) Gain on
disposal 260,763 -- 632,058 -- Income tax expense (benefit) 6,320
(120,533) 37,016 (114,792) ----------- ----------- ------------
------------ Income (loss) from discontinued operations 1,114,286
(2,957) 1,649,137 90,535 ----------- ----------- ------------
------------ Net income $2,390,619 $704,194 $3,482,612 $1,439,388
=========== =========== ============ ============ Income from
continuing operations per common share: Basic $0.09 $0.05 $0.13
$0.10 Diluted $0.08 $0.05 $0.11 $0.09 Income from discontinued
operations per common share: Basic $0.07 $0.00 $0.11 $0.01 Diluted
$0.07 $0.00 $0.10 $0.01 Net income per common share: Basic $0.16
$0.05 $0.24 $0.10 Diluted $0.15 $0.05 $0.21 $0.10 Weighted average
shares used in the calculation of net income per common share:
Basic 14,939,806 14,094,690 14,663,767 14,076,833 Diluted
16,479,112 15,300,803 16,428,894 15,070,362 *T
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