Press Release



QSound Labs Reports Second Quarter Results for 2004



Calgary, Alberta - August 4, 2004 -- QSound Labs, Inc. (NASDAQ: QSND), a leading developer of audio and voice software solutions, reported revenues for the three months ended June 30, 2004 of $608,000 as compared to $383,000 for the same period in FY2003. The operating loss for the quarter was $(287,000) or $(0.04) per share as compared to an operating loss of $(401,000) or $(0.06) per share for the same period last year. After allowing for non-cash items such as depreciation and foreign exchange gains, the net loss for the period was $(389,000) or $(0.05) per share as compared to $(327,000) or $(0.05) per share for the same period in FY2003.

Revenues for the six months ended June 30, 2004 were $1,119,000 compared to $1,214,000 in FY2003. The operating loss was $(709,000) or $(0.09) per share in FY2004 and the operating loss was $(223,000) or $(0.03) per share in FY2003. Net loss for this period was $(923,000) or $(0.13) per share as compared to $(239,000) or $(0.03) per share in FY2003.

The Company reported a working capital surplus of $2,133,000 at June 30, 2004 of which cash comprised $1,754,000. Cash increased during the quarter, due primarily to the exercise of stock options. Cash used in operations decreased to $321,000 in this quarter from $690,000 in the preceding quarter as a result of previously announced cost containment programs, and advance royalty collections on new contracts.


"The microQ design wins announced during this quarter are significant for a number of reasons," stated David Gallagher, President and CEO of QSound Labs. "The licensees announced, in particular Broadcom and Qualcomm, have large distribution channels which are potentially available to our product and are a validation stamp for our technology to the industry at large."


"Management expects recurring revenues from these contracts to commence in early 2005. The Company is also working on new microQ design wins, which it expects will also contribute to revenues in 2005."

"Our PC audio software solution, QVE, continues to gain wider distribution as during the quarter our main licensee, Philips, shipped this solution, branded as the SoundAgent2, in soundcards, USB powered speakers and USB enabled mini component stereo systems."


"VoIP product sales were weak and will continue as such until new products with a wider application, are available. This is expected to occur in early FY2005."

This release contains forward-looking statements within the meaning of the Private Securities Litigation Act of 1995 concerning, among other things, expectation of revenues from existing and new microQ licensees, product distribution through Philips, sales of existing and new IP telephony products, and ongoing licensing activities for QSound technologies. 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 loss of relationships with companies that do business with QSound, continued growth of mobile devices and Internet telephony products, successful product development, introduction and acceptance, QSound's ability to carry out its business strategy and marketing plans, dependence on intellectual property, rapid technological change, competition, general economic and business conditions, 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.





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