Press Release



QSound Announces Reverse Stock Split



Calgary, Alberta - July 6, 2001 - QSound Labs, Inc. (NASDAQ: QSND), a leader in the development of audio and e-commerce technology and products, today announced that its Board of Directors has approved a 1-for-4 reverse split of the Company's outstanding common stock. This decision was authorized by an overwhelming 98% of voting shareholders at the Company's recent Annual & Special Meeting.

"We believe that the reverse stock split will help preserve the liquidity and marketability of our common stock,'' stated David Gallagher, the Company's Chairman and Chief Executive Officer. "Management views this as one facet of the overall plan to improve shareholder value. Our cost control measures took effect in the first quarter and we expect those benefits to continue for the remainder of the year. We also expect revenue growth to occur as new products come online in the third quarter. Our intellectual property portfolio continues to grow; the US Patent Office recently advised that our patent applications for QSurround®, QMSS™, stereo expansion for headphones and 3D positioning for teleconferencing technologies have been allowed."

The reverse stock split will become effective and apply to shareholders of record, immediately prior to the open of trading on the Nasdaq Small Cap Market on Monday, July 9, 2001. On that date, the Company's common stock will begin trading on a reverse split basis under the temporary trading symbol QSNDD for a period of 20 trading days to reflect the post-split status of the stock. At the end of this period, the ticker symbol will revert back to QSND. Upon the effectiveness of the reverse stock split, 4 shares of common stock will be converted and reclassified as one share of post-split common stock, and each existing stock certificate will represent one-fourth the number of shares shown thereon. Fractional shares will be rounded up.

This release contains forward-looking statements within the meaning of the Private Securities Litigation Act of 1995 concerning, among other things, 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 Company's ability to carry out its business strategy and marketing plans, including availability of sufficient resources for the Company to do so timely and cost effectively, the Company's ability to maintain its listing on the Nasdaq SmallCap Market, commercialization of the Company's technologies, consumer acceptance of the Company's products and services, 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, manufacturing uncertainties, rapid technological change and competition, continued growth of the Internet 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.





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